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FactCheck: PMQs and fiscal rules

By Channel 4 News

Updated on 29 October 2008

Prime Minister's Questions focused on the economy, but did the former Chancellor get his figures right?

The claim

"We have had the longest period of growth in the history of this country."
Gordon Brown, Prime Minister's Questions, 29 October 2008.

The analysis

It's a favourite claim of Brown's - and one that might have been laid to rest after figures last week showed Britain's economy shrank for the first time in 16 years between July and September.

But no, and so it falls to us to draw attention to Brown's statistical chicanery once again. It is true only on the basis of quarterly growth figures, which go back to 1955.

Annual growth figures, however, go back much further and show a much longer period of uninterrupted growth from 1948 to 1973. Although there was the odd quarter of negative growth within this period, year on year the economy continued to grow - arguably a more useful measure for historical comparison.

How long the new negative growth trend lasts for remains to be seen - but the unexpectedly high 0.5 per cent drop suggests the UK could be in for a longer and deeper recession than had been feared.

But even if these fears turn out to be unfounded and the economic decline tips straight back round, Brown would still need another decade or so of growth to beat the post-world war two spurt.

FactCheck 2005: Labour's growth story is impressive, but there's more to it

The claim

"As for the fiscal rules, we have met our fiscal rules in the last ten years."
Gordon Brown, Prime Minister's Questions, 29 October 2008.

The analysis

Hmm. Quick recap: Brown has placed great emphasis on two fiscal rules. The golden rule says the government will borrow only to invest over the course of the economic cycle; the sustainable investment rule promises to keep net public sector debt under 40 per cent of national income.

The last time we looked, the government had done a reasonable job of sticking to the golden rule so far - although there's a fair amount of wriggle room given the fact that an economic cycle lasts an undetermined number of years and the treasury has redefined the timing during a cycle on more than one occasion.

But the sustainable investment rule looks far stickier. A national debt of 43 per cent of GDP fell sharply during the first few years of Labour's rule, meaning that for much of their term of office, the 40 per cent sustainable investment ceiling seemed very high.

How things have changed. The budget in March this year put debt at 38.5 per cent of GDP, and predicted it would rise to 39.8 per cent in 2010-11. That was before the post-budget £2.7bn 10p tax compensation package and a £1.1bn postponement of a planned increase in fuel duty.

Not included in the debt figures for the purposes of measuring progress against the rule is the nationalisation of Northern Rock, which would have pushed things up to 43 per cent of GDP. More recently, the government has also footed the bill for the nationalisation of Bradford and Bingley and bought £37bn of shares in three high street banks.

It's arguable how much of this should be counted in the normal way - in a best case scenario, the government would be able to shift the debt from the public balance sheet and may even make a profit on its temporary investment.

But even discounting these debts, increased borrowing and reduced tax receipts means the 40 per cent ceiling is likely to be shattered next year.

The sources
IFS analysis of today's public finance figures
FactCheck: has Brown broken the rules?

The claim

"I think the only figure that matters now is that the Liberal party want to cut £20bn from public spending...The policy that [Nick Clegg] announced at his conference was to cut spending by 20bn. That's the wrong policy for this country at this time."
Gordon Brown, Prime Minister's Questions, 29 October 2008.

The analysis

Brown makes three references to the Lib Dems' desire to cut spending by £20bn during today's PMQs. Clegg counters that the PM doesn't understand the difference in a spending cut and a spending redistribution.

The Lib Dems' tax cut policies got a lot of attention around their party conference last month, but is the PM representing them fairly?

The Lib Dems newest plan - passed in principle at conference this year - would cut £20bn from public spending on things the party considers a waste of time, including the ID card scheme, child trust funds and the department of business, enterprise and regulatory reform.

But most of the cuts would be redirected to spending in areas the party does consider worth it, such as education and social care. Anything that was left over would go on tax cuts.

So the Lib Dems policies do pave the way for a tax and therefore spending cut, the specifics haven't yet been thrashed out and the proposed cut isn't the full £20bn. Brown's claim today only tells half the story.

FactCheck: Lib Dem tax plans

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