A new report by the OECD out today contains a key graph that won't please the Rally Against Debt brigade, writes Left Foot Forward's Will Straw.
A new report by the OECD out today contains a key graph that won’t please the Rally Against Debt brigade. The group of right-wing activists supported by Tory donors and the TaxPayers’ Alliance who are due to protest in London on May 14th are rarely prepared to admit that Britain is one of the least indebted rich countries.
Today’s Guardian reports that:
The British political right is preparing to fight back against anti-cuts protests by staging its first pro-cuts demonstration, in central London next month, in a move that has provoked comparisons to the US Tea Party movement.
The Rally Against Debt, on 14 May, is being organised by activists including the Taxpayers’ Alliance group, which is backed by Tory donors. Hundreds, if not thousands, of supporters of the cuts programme are expected to turn out at Westminster in a rare show of force by what organisers believe is “a quiet majority”.
But the OECD’s new report published today shows that, despite larger than average deficits in 2009 and 2010 which helped limit the worst impact of the recession, Britain still has lower debt than all but one member of the G7. Japan, Italy, the US, France and Canada all have higher levels of gross government debt than the UK. Overall the UK is 12th out of the 29 countries covered by the report and suffers from none of the sovereign debt issues that face other countries on the periphery of Europe (see p.19 for more details).
There is a political consensus in the UK that the deficit has to be closed, the question is over what time period it should take place. All the signs are that the Government’s preferred, quicker approach, supported by most of those rallying against debt, is not working. If that proves to be the case, the right-wing ralliers may find that their approach leads to more debt rather than less.
Perhaps that’s why despite news coverage today and yesterday, the Rally has just 857 ‘likes’ on Facebook compared to some 40,000 who supported the TUC’s March for the Alternative on the social network.
54 Responses to “OECD’s inconvenient truth for right-wing ‘Rally Against Debt’”
Francis
@Julie…terribly sorry that the facts don’t support your viewpoints. Now just go and close your eyes – don’t let that nasty thing called the truth ruin a good bit of labour-bashing!
@Chris @ Joe – yes, but it does dispel the myth that Labour was entirely responsible for the deficit by reckless overspending. It was caused by over-reliance on financial services, meaning that when the credit crunch came, our entire economy was, in layman terms, f**ked. Yes, Labour need to take some of the responsibility for not properly regulating the banks – actually, they already have – or building up alternatives to the financial services.
But who started this mass deregulation of the banks and financial services? Who, while labour were in power, constantly criticized Labour for regulating too much, and described Gordon Brown as “the great regulator” just a year or so before then banks collapsed partly due to lack of regulations and oversight?
And who constantly voted for the Tories deregulatory platforms at four consecutive general elections, meaning that Labour realised that to get elected they would have to go down the same path of neo-liberalism?
Oh, and look at the USAs debt figure. They’re deficit 07′-10′ was similar to ours (at the height of the recession, it was greater). Yet Obama followed the plan advocated by Labour and being followed by practically every other country in the world, and their deficit fell significantly last year, despite not cutting but spending huge amounts in stimulus spending!
Guy The Mac
I’m guessing the point you wish to highlight is that is that of 28 developed countries analysed there are 11 with worse debt to GDP ratios. Implicitly, I guess your leap of logic from that is that if at least eight of the 11 to the left of us on the graph have not yet fallen off a cliff (so ignoring, to make the point, Ireland, Greece and Portugal) – then we have plenty of room to keep going? After all look at Japan! (and, to make the point, ignore their ‘lost decade’). So why are we banging on about the peril of debt?
The chart get’s really interesting when you compare the size of the increase in just those three years from 2007-2010 (the more purple part of the graphic). It doesn’t take a genius to extrapolate that rate of change then imagine how this chart will look when the same snapshot is taken next year and the year after even allowing for the slowing of that rate due to the cuts. Nobody other than Ireland and Greece has a greater rate of increase than the UK. (perhaps Spain?). It is that ‘rate of increase’ that we need to get under control.
If you’re happy we can sustain adding to the debt, then you can take some comfort that the Coalition is adding to it at a pretty staggering rate despite the ‘savage’ cuts – some of us still do worry about that. This rate of increase lowers the faith in our ability to service our debt, which puts up the rates on bonds and so costs the Government more to service our debt. Which means we spend money on interest rather than hospitals or schools (or heaven forbid tax cuts).
Mark Stevo
The USA that, according to the OECD, reduced net borrowing from 11.3% in 2009 to 10.5% in 2010? Not exactly a ringing endorsement. I’m not sure there’s many lessons to be drawn from the US for our purposes in any case, it’s technically insolvent and without some dramatic changes bondholders will eventually wake up to that, whether it be in 5, 10 or 50 years.
scandalousbill
Guy the Mac,
You say:
“The chart get’s really interesting when you compare the size of the increase in just those three years from 2007-2010 (the more purple part of the graphic). It doesn’t take a genius to extrapolate that rate of change then imagine how this chart will look when the same snapshot is taken next year and the year after even allowing for the slowing of that rate due to the cuts. Nobody other than Ireland and Greece has a greater rate of increase than the UK. (perhaps Spain?).”
Did I miss something here? It seems to me that during the period of the last three years massive expenditures in equity purchase of the banks and QE may have been an impact of this rate of increase in the national debt. I fail to see how such exceptional expenditures constitute a trend? The cuts are justified as measures to reduce the structural deficit as is the VAT rise. While there are clearly risks due mainly to impedance of GDP growth, larger expenditure due to higher unemployment, etc. I cannot see a continuous trend and would argue that the coalition cuts as planned may well pose the risk to bond market adversities.
eh
As the defecit stands at 12% of GDP if the UK were to pursue no defecit reduction strategy during the current parliament then by the end of the parliament public debt would be c130%, higher than any of the countries above at present aside from Japan.