How frightening is the deficit?
It seems to show rather modest borrowing every year since the late 1970s, but monstrous profligacy in the last year of the Labour government.
But the graph is actually misleading. The deficit figures from earlier years have not been adjusted for inflation.
Here’s what a graph that did adjust for the falling value of money over the past three decades would look like:
The recent deficit is still terrible in historic terms - but it’s no longer so disastrously divorced from all previous experience.
Yet even factoring in inflation does not give the full picture. Our economy is much larger today than it was in the mid 197os. A better way of measuring the deficit over time is borrowing as a percentage of GDP
And here’s what that shows:
Again, still bad – but even less divorced from historical experience.
Tim Montgomerie, the editor of Conservative Home, called the Guardian’s graphic “frightening” on Twitter today.
My message would be: be afraid, but not that afraid.
(Data source: HM Treasury)Tagged in: borrowing, gdp, inflation, the deficit, the guardian, tim montgomerie
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