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#GE2010: Measuring the disingenuity gap

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Paul Mason | 09:24 UK time, Wednesday, 7 April 2010

The strange, staged, stunt-ridden spectacle that is Day One of a British election campaign brought us temporary relief from the disingenuous battle over tax rises and spending cuts the parties have been waging. But it will soon be back.

[UPDATE: Gordon Brown's GMTV interview means it is back already.]

Let me first of all justify the word "disingenuous". Ingenuous means frank and open; disingenuous means lacking candour, frankness, open-ness.

Now let me quantify it. According to Budget 2010, two factors contribute to slashing the budget deficit: cyclical and structural. The aims is to halve the deficit from 11.8% of GDP to 5.2% by 2013-14 - that is 6.6 percentage points or £112.5bn in 2013-14 money.

Here's how they get there according to Budget 2010 (measured in billions extrapolated from Section C15, page 186):

- 22.5bn as a result of the projected economic recovery.

That leaves the 90bn so called "structural deficit" which is addressed by:

- 19bn tax rises

- 38bn spending cuts

- 17bn from the reversal of the 2009 fiscal stimulus

- 17bn from an assumed upturn in tax receipts "not allowed for in the cyclical adjustment methodology, for example from a recovery in the financial and housing sectors".

The holes in this were spotted on budget day but have not gone away. They are twofold:

a) Only 20bn of spending cuts have so far been identified out of 38bn. Of these 11bn are "efficiency savings" not guaranteed to be delivered. 5bn are cuts already announced and 4bn are cuts to public sector pay and pensions. That leaves a minimum of 18bn of cuts yet to be specified, even if the full 20bn can be delivered.

b) The 17bn expected from housing and finance is not guaranteed to materialise.

c) Furthermore, the growth projections on which a future Chancellor gets 22.5bn out of a cyclical upturn have been decried as over-optimistic.

This is the credibility problem that lies at the heart not just of Labour's budget plans but which forms the "base case" for all potential incoming governments. They will face the same civil servants on May 7th as Alistair Darling did, over the same cold croissants, and will have the same problem.

Now let's look at whether the Conservatives' tax plans clear anything up. By raising the threshold at which people start paying the new, higher National Insurance contributions (NICs), the Conservatives raise 5.6bn less tax in 2011-12. But they have promised to cut spending in this financial year by 6bn, again through "efficiency savings". (For clarity, these are 2010 billions, not 2013 billions, but it's about half a percent of GDP in each case).

If we add the caveat that efficiency savings are not guaranteed, what the Conservative proposal does is alter the ratio between spending cuts and tax rises from about 66:33 to 80:20 by the end of the parliament. The Conservative plan also claims to get deficit reduction going a year earlier than Labour's, since the impact of the £6bn cut this year then feeds over into next, etc. I would also add the observation that the renegotiation of contracts seems to form a central core to the Tory 6bn of "low hanging fruit" - one senior Conservative told me that the major contractors were "surprised" that only Whitehall, of all their customers, had not demanded renegotiation of contracts during the downturn. We'll see how happy they are once the renegotiations start.

What the Conservative plans do not yet clear up is where the remaining spending cuts are coming from: £18bn in Labour's projection (£27 billion in the Tory analysis of Labour's budget, on the basis that some of Labour's efficiency savings are not achievable).

OK, now the Libdems. The Liberal Democrats have specified an extra 15bn of spending cuts, £10bn of which go on deficit reduction. The Libdem claim to be "closer than the other parties" in filling in the disingenuity gap stands up - but only if you accept all the planned growth and efficiency savings in Budget 2010 hold water.

Right now it suits the parties for us to get lost in the detail. But if you add up all the caveats it amounts to this:

There is at the very least an 18bn gap in the assumed deficit reduction plans of Labour and the Conservatives. Both parties already rely heavily on "efficiency savings" for which there is not proven methodology nor track record of delivery. In addition, the baseline scenario on which all other parties calculate rests on government growth projections way more optimistic than those of independent forecasters.

On top of that there is the pain projected for the first two years of the parliament after next, calculated at about £40 bn by the IFS, that is not accounted for by any planned cut, tax rise or growth.

The problem is, as Greece is now finding out, financial markets look for big-picture credibility.

I heard one Labour minister comment disdainfully, off camera, during a recent broadcast by one of my colleagues, "when in doubt ask the markets". Unfortunately this principle does apply, because the markets - long term weighing machine they may be - are, as the saying goes, in the short term a voting machine. For now they have suspended judgement on the UK's fiscal credibility because they know all parties plans are incomplete.

Being in government, Labour are pinned to figures on growth and the "cuts specificity gap" contained in Budget 2010. Opposition parties are currently making free with their right to propose all kinds of measures without reference to growth projections and total cuts targets. In that sense voters already face trying to measure apples against oranges.

But with all parties voters are being asked to make such a judgement on the basis of incomplete information, risky assumptions about growth and barely sketched out plans for efficiency savings.

What you therefore have to keep in mind when politicians rail at each other about tax, is the size of the cuts they have refused to specify and the riskiness of the assumptions on which they calculate those cuts, and the riskiness of their growth projections.


  • Comment number 1.

    Couldn't they just take all that non-paid tax that cheating double-accounting that goes on, sectretly and not so secretly moved around? How much is that worth every year? Something like 15 times the welfare bill - would be better than forcing the stroke victim out to find work during a time of recession or not.
    Isn't that a significant amount of money that could make a difference.

    If not why not?

  • Comment number 2.

    Labour's budget assumptions also include : 1) fiscal measures not withdrawn in 2010 - so if Conservatives tighten now, they will walk away from the assumption 2) price of credit "continues to return closer to historical norms"-? 3)credit availability continues to improve-? 4)QE supports demand-? 5)market expectations remain that Bank Rate stays at historical lows-? 6) sterlings depreciation boosts exports with orderly adjustment of sectoral balances-? 7) G20 sticks to fiscal boosting-?

  • Comment number 3.

    All of what you say displays the characteristics I look for when looking at a set of engineering calculations for foundations to hold up a 60 storey structure.

    Principally they are, clarity in presentation with a clear logical thread running throughout with all assumptions made (yes we have to make those even in engineering)seperated out and given individual attension to ensure they are not optimistic, all assumptions made are on the reasonably cautious side (i.e. we are very careful to be sure that the building won't fall down and wreck lives because of the nature of the assumptions..aka educated guesses, we made).

    Pretty simple really isnt it! Design and Build for the worst, hope for the best as a bonus!!

    Why dont politicians, economists and journalists behave with the same basic integrity engineers use when looking at data when designing things which,if they failed would result in lives and livelihoods being lost? I wonder what the world would look like and how often things would 'fall down' in a world governed by solid engineering principals?

    Being a chartered Civil engineer with an unhealthy armchair interest in economics and politics, is unfortunately a very frustrating person to be.

    Believe me I know.

    It is nice to see a journalistc piece which would meet my basic criteria for checking calcs though. If you follow those basic principals you tend to find that the details in the calcs are also fine and the whole thing has a certain symetry and elegance about it, things you never seem to find in politics.

    Our 'leaders' in their communications with us seem to focus on the details in a deliberate attempt to distract us from the obvious failings in the fundamentals.

    keep up the good work Paul, at least one exasperated civil engineer with a family to feed is clinging grimley onto his own sanity because of it!!!


  • Comment number 4.

    Bit of a rejig & punctution might help here...

    brought us temporary relief from the disingenuous battle over tax rises and spending cuts the parties have been waging. But it will soon be back.

    Let me first of all justify the word "disingenuous". Ingenuous means frank and open; disingenuous means lacking candour, frankness, open-ness.*

    *[UPDATE: Gordon Brown's GMTV interview means it is back already.]

    Anyway, I hope my local council and various government departments will help my sorry married self in getting back, less vast government machine deductions for pay, perks & pensions, the money taken away in the first place.

    Also, as the whole thing has devolved into gameshow farce, can we just have a bell ringing when a pol manages a true statement and a klaxon when they spout BS or outright porkies.

    After PMQs today (and all the love in that cringing gabble of an 'interview'), it must be reassuring that he regularly rehearses possible questions. For whom, I can't imagine.

  • Comment number 5.

    greek banks that are part of the financial system demanding action by the greek state to sort their finances out have asked to access the 17 bill left in the state support package.

    which is a bit like 'do as i say not as i do'?

  • Comment number 6.

    Well presented piece. There are holes in credibility of all proposed options, so in the absence of clarity from anyone in the next 4 weeks we are forced to choose between Brand Labour, Brand Conservative, Brand Liberal Democrat.
    The figures are of such size that all parties are faced with a pick list of policy options (that will make a difference to the deficit) that are in reality also very similar. The same civil servants that are being asked for spending cuts, whatever party wins.
    Like Greece, none of the options we face are palatable, as it's likely to be tax rises coupled with spending cuts and erosion of our standard of living as Sterling falls.
    And yet, and yet the electorate are obsessing about immigration, an inarticulate, racist, lashing out of the disconnected (per your Margate piece last week). In the absence of clear alternatives on an economic level, the debate descends to lowest form of politics. Nobody is telling the disconnected that there really is nothing for them in this country any more. Dependency, benefits, daytime TV, decay, nothing. Very sad.

  • Comment number 7.

    Surely the contract renegotiations are going to lead to more redundancies, when I worked for a contract outfit, when the "client" paid less, we employed less staff.

    I think the whole thing is pie in the sky personally, how anyone expects to reduce that much of the deficit in one term is beyond me, you'd have to cut large amounts of public spending on the stuff that really costs, namely the NHS and the Welfare state, if they're to get close. Unless they put up taxes broadly, and expand the tax base.

    In a very real sense the return of the financial markets to health will do nothing to help the Govt's coffers, because just about every financial firm is sitting on enough loses, not to have to pay tax for 5-10 years. Given that you can offset losses against tax at present.

    As such the Tory claim of rolling back the NIC increase is not only disingenuous but intellectually dishonest IMO. Regardless of who gets in there will be more tax to pay, and the poor and the middle classes will suffer the most. To claim otherwise if fantasy.

  • Comment number 8.

    I do not know what you are angsting about Paul - house prices are rising. Honest, an estate agent told me so this very morning! Asking prices in Swansea going up by 15% to 25%!

    Yippee! Economic crisis over.

    It is Day 2 and if I never see or hear another politician on the television or radio again it will be too soon.

    I am seriously of thinking of voting for the first person who knocks on my door and asks me to vote. I won't hold my breath though as a hippo in a pink tutu could win in Swansea as long as it was the Labour candidate.

    In the interests of parliamentary democracy I hasten to add that hippos in pink tutus from all the main parties are welcome to stand in Swansea.

  • Comment number 9.

    Anyone who has been involved in trying to bring in raised efficiencies in the public sector knows it is fraught with uncertainties, unintended consequences and where one becomes quickly acquainted many devils in the detail! Inconveniently back office staff are the ones that organisations rely on to introduce new more efficient methods and what tends to happen is that efficiency savings are little more than de-staffing with speed - up or degraded quality. Efficiency savings are in the main a euphemism for cuts like the removal of a Sunday postal collection. Dont be fooled! They are ninety percent presentation and ten percent delivery.

    'Dramatic' reductions in public expenditure are largely self defeating either because they imply large severance costs and/or because there are knock on effects on the private economy. One way to both stimulate the economy and possibly reduce net expenditure is to repatriate off shored public services. Renegotiate legally enforceable contracts sounds good but likely to lead to disproportionate reductions in services and/or other unintended consequences.

    Yes politicians should be confronted with their fiscal denial and, Paul, you are hereby appointed to do it!

  • Comment number 10.

    The current economic plan of the Labour government is to pay down the deficit of GBP 163 billion for 2009/10 to be just GBP 74 billion by 2014/15. However, this will increase the national debt to about GBP 1.4 trillion excluding off balance sheet items such as public sector pensions. They also argue economic growth of 3.5% from 2011 will ensure this policy can be fulfilled.

    I find this proposition truly frightening. I also consider it far too modest and quite hopeful.

    Yet the other two main parties are proposing something much the same with a few knobs and whistles on it. Other parties all intend to stop the crisis affecting their particular constituencies or just want to be nasty to foreigners as you have so rightly pointed out.

    Seemingly nobody has a clear idea as to what to do other than manage the problem. Sadly, just managing the problem is not an option. Sure, it has to be managed for now, but how do we set out to solve it and stop it happening again? That is the real question: we must ask it and ask it often all the way up to May 6th.

  • Comment number 11.

    so house prices are rising are they? That means that all the sacrifices we have made, all the sackcloth and ashes, are to be frittered away by George Osborne and his mates...well, I never..

  • Comment number 12.


    Westminster espouses DIVISION - 'divide and sink' is the motto. Westminster lives to have groups of deckchair attendants argue over HOW AND WHEN IT IS TO BE DONE, AND HOW MANY CHAIRS TO MOVE before any actual movement occurs.

    Can you put Super-Mole Crick on the job of finding out just how much money, in total, is expended by the three parties by the end of the game?

    How threatened does this country have to be, before Westminster is shut down, and we get help from Norway or Venezuela? Even if we had a government of national unity, our pathetic MPs would all be applying tactics, in preparation for the and of its span.

    Party politics can no more govern pragmatically, than adversarial legal proceedings can guarantee justice.

    If it were not for disingenuous media input (any edgy story will do) the Emperor would now be seen as butt naked.


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