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

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."

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

The GDP in 2010 was…… £1.435 trillion 5 Consumer spending Business Investment Government Spending International Trade income GDP =

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

60% of GDP 7

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

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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 is caused by overspending…” 12 (Coalition Government)

13 INCOME Mainly taxes SPENDING  Public services  Investment  Debt payments Is spending too high or income too low? Government

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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

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

18 Conservative Government Source: Public Finances Databank, ONS

The Thatcher government paid the equivalent of £174m per day 19 Thatcher Government

SO WHY PAY OFF THE DEFICIT OVER 4 YEARS? Our Borrowing is cheap, mainly from the UK and can be repaid over years 20

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

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

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24 THE GINI CO-EFFICIENT – UN MEASURE OF INEQUALITY Inequality

“What really caused the deficit?” 25

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– ) 26

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which is

Which raises some interesting questions

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?

“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

 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? 32

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 33

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 35