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

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

Professor Joseph Stiglitz, Nobel Prize For Economics In 2001, Daily Telegraph Professor Paul Krugman, Nobel Prize for Economics in 2008, New York Times “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 Christopher Pissarides, Nobel Prize for Economics in 2010, Daily Mirror “The Chancellor has exaggerated the sovereign risks that are threatening the country.” "I think it is likely that the economic downturn will last far longer and human suffering will be all the greater."

of GDP 4 BIG debt is when you compare it as a percentage You can only understand how

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

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

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

Our Current debt – GDP ratio 64.6% 8

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) IF YOU DEDUCT WHAT WE GAVE BANKS, debt is EVEN LOWER 9 *This includes £100bn+ of the banks’ debts that is now UK Government debt

Our debt is historically low 10

.... our debt is low compared to the rest of the world Source: CIA World Factbook 11 USA 95% CANADA 81% CANADA 81% GERMANY 72% GERMANY 72% FRANCE 77% SPAIN 70% SPAIN 70% PORTUGAL 87% ITALY 119% JAPAN 200% GREECE1 87% UK 65% UK 65% Source: CIA Factbook

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

THERE ARE 2 SIDE TO deficit 13 INCOME Mainly taxes SPENDING  Public services  Investment  Debt payments Is spending too high or income too low? Government

Growth and deficit are linked 14

There is a tax deficit 15 Without the recession tax revenues should have been £100bn more than today. The UK TAX take

16 Growth Deficit Oct 2009 to March 2010 £22bn

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

18 Conservative Government Source: Public Finances Databank, ONS

SO WHY PAY OFF THE DEFICIT OVER 4 YEARS? Our Borrowing is cheap, mainly from the UK and can be repaid over years 19

SERVICING THE DEBT…. The Thatcher government paid the equivalent of £174m per day 20 Thatcher Government

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

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

SINCE 1975 we have replaced direct with indirect taxes… 23

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

THE DEFICIT “What really caused the deficit?” 25

Let’s not forget who’s to blame… “…although the causes of the crisis may have been rooted in the financial sector, the consequences are affecting everyone, and will continue to do so for years to come. ” (Mervyn King’s Address to the TUC conference – ) 26

how the banks affect our gdp….. Increasing or reducing the supply of money into the economy through household and business lending artificially inflates or deflates our GDP – i.e. Banks manipulate the flow and quantity of money EXAMPLE: in the 2000s banks pumped between £10-14bn into the economy every year through housing equity withdrawal. Since 2009, banks are refusing to lend and have sucked £15bn out of the economy per year (Source of statistics: Bank of England) 27

Growing influence of finance 28 The contribution of sectors as a % of GDP

Re-Balancing the economy 29 NoYes

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? 30

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 31

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,

Economyths: prepared by Barry Kushner Saville Kushner 33