Perhaps the most surprising claim in David Cameron’s speech today was that the public finances are in an “even worse” state than we thought. Surprising because, only a few weeks ago, the Budget deficit was in fact revised down from £163.4bn to £156bn.
Cameron would say that his claim rests on the news that government debt interest will reach £70bn in the next five years.
Here’s the key passage:
Based on the calculations of the last government, in five years’ time the interest we are paying on our debt is predicted to be around £70bn. That is a simply staggering amount.
No wonder the previous government refused to publish the information. Let me explain what it means. Today we spend more on debt interest than we do on running schools in England. But £70bn means spending more on debt interest than we currently do on running schools in England plus climate change plus transport.
Interest payments of £70bn mean that for every single pound you pay in tax, 10 pence would be spent on interest.
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But, as the Telegraph’s Edmund Conway points out, this isn’t news. In research cited by the Tories at the time, the Institute for Fiscal Studies calculated several months ago that debt interest payments would climb to £73.8bn by 2014-2015.
Thus, there is no economic data on which to base the claim that the debt problem is “even worse” than first thought.
If Cameron is convinced that dramatic spending cuts are needed, then he should have the decency to make this argument without misrepresenting the state of economy.
It’s hard to avoid the conclusion that the Prime Minister, afraid to make the honest case for cuts, has instead resorted to scare tactics.
UPDATE: Alistair Darling has just issued a firm and measured rebuttal of Cameron’s claims. He said: “There is absolutely nothing now that people didn’t know when I made my Budget statement in March.
“To somehow claim that’s he’s opened the books and found things are worse than he thought is nonsense. This is a classic case of the Tories seeking to blame the last government in order to pave the way for things they’ve always wanted to do.”
Darling has actually understated his case. At the time of the Budget we thought the deficit was £163.4bn. We now know it to be £7bn lower than that.
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