Busting the single narrative

1. Busting the single narrative the debt crisis as just another story – or why are we prey to a single narrative?

2. This was on the Andrew Marr show “We were on the brink of bankruptcy…” “You clearly need to make the savings, the cuts and raise taxes...”

3. Leading economists disagree “The Chancellor has exaggerated the sovereign risks that are threatening the country.” Professor Christopher Pissarides, Nobel Prize for Economics in 2010, Daily Mirror 09.01.11 "I think it is likely that the economic downturn will last far longer and human suffering will be all the greater." Professor Joseph Stiglitz, Nobel Prize For Economics In 2001, Daily Telegraph 08.09.10 “The best guess is that Britain in 2011 will look like Britain in 1931, or the United States in 1937, or Japan in 1997.” Professor Paul Krugman, Nobel Prize for Economics in 2008, New York Times 21.10.10

4. You can only understand how bigdebt is when you compare it as a percentageof GDP

5. But what is GDP? The GDP in 2010 was…… £1.435 trillion GDP = Consumer spending + Business Investment + Government Spending + International Trade income

6. NATIONAL DEBT “Our debt is higher than it’s ever been…” (Coalition Government)

7. The Maastricht Treat EU limit on debt 60% of GDP

8. OUR CURRENT DEBT – GDP RATIO 64.6%

9. If you deduct what we gave banks, debt is even lower • UK net debt is £952 bn • Excluding Financial sector intervention, debt is £845 bn • Or 57.1%of GDP! • Source: Office National Statistics (November 2010) *This includes £100bn+ of the banks’ debts that is now UK Government debt

10. OUR DEBT IS HISTORICALLY LOW

11. Our debt is lower than our trading partners UK 65% CANADA 81% GERMANY 72% FRANCE 77% USA 95% ITALY 119% PORTUGAL 87% GREECE187% SPAIN 70% JAPAN 200% Source: CIA Factbook Source: CIA World Factbook

12. THE DEFICIT “The Deficit is caused by overspending…” (Coalition Government)

13. There are 2 sides to Deficit INCOME Mainly taxes • SPENDING • Public services • Investment • Debt payments Government Is spending too high or income too low?

14. GROWTH AND DEFICIT ARE LINKED

15. THERE IS A TAX DEFICIT • The UK TAX take 1995-2010 • Without the recession tax revenues should have been £100bn more than today.

16. GROWTH reduced the deficit Oct 2009 to March 2010 Deficit £165bn £22bn £145bn Growth 1.5%

17. THE DEFICIT “Interest repayments are higher than ever…” (Coalition Government)

18. GOVERNMENTS ALWAYS BORROW Conservative Government Source: Public Finances Databank, ONS

19. Servicing The Debt • The Thatcher government paid the equivalent of £174mper day www.ukpublicspending.co.uk Thatcher Government

20. Our Borrowing is cheap, mainly from the UK and can be repaid over 13-15 years So why pay off the deficit over 4 years?

21. THE DEFICIT “We have to make cuts…” (Coalition Government)

22. Is THIS where the deficit is?? We don’t pay enough in tax to cover what we spend. Source - Eurostatnewsrelease – June 22nd 2009 Levy Tax…

23. SINCE 1975 we have replaced direct with indirect taxes… High tax rate

24. The UK is now one of the MOST UNEQUAL societies in the OECD THE GINI CO-EFFICIENT – UN MEASURE OF INEQUALITY Inequality

25. THE DEFICIT “What really caused the deficit?”

26. Let’s not forget who’s to blame… “…the billions spent bailing out the banks and the need for public spending cuts were the fault of the financial services sector." (Mervyn King giving evidence to the Treasury Select Committee– 02.03.11)

27. The Banking Deficit Banks owed 35 times what they were worth…

28. The Banking Deficit £955bn which is Equal to the UK GDP

29. Which raises some interesting questions........

30. The £995bn banking deficit is also equal to 350% of what the banks are worth. How come banks can sustain a deficit 350% of their worth and the Coalition Government says the country cannot sustain a deficit of 58% of what we are worth? Why are bankers calling for public austerity and deficit cutting when they sustain their own deficit of these proportions? If we can help the banks pay off their deficit (here and in Ireland) why can’t they help pay off ours?

31. When will the banking deficit be paid off? “It is likely that a substantial proportion of these schemes and investments will be with us for some time....In the meantime, the Government carries an estimated £5 billion a year cost of financing the shares and loans, and may have to invest more in the future to protect the current value of its investments.” National Audit Office Report, December 2010

32. So do we need cuts? • Debt is low compared to our history and partner nations • Growth plays a key role in reducing the deficit • If tax is lagging behind spending, why not borrow short term to encourage growth? • What would 3% per year growth for 5 years do to the deficit?

33. SO What is this a crisis of? • National debt? NO • Current account deficit? Depends on your values - it’s political • Economic governance? YES • Employment? YES • Banking? YES • Democracy and public debate? YES

34. OUR SOCIETY IS MORE THAN OUR ECONOMY “The gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials.” Robert Kennedy, 1968

35. Economyths: prepared by Barry Kushner barry@blueurbansky.com Saville Kushner savillekushner@hotmail.co.uk