Britain may not feel like a dynamic, world-beating economic powerhouse right now, but that’s what it is, according to the chancellor.
George Osborne used his Conservative conference speech to claim that this country is taking on all-comers on growth, jobs and deficit reduction, and beating them hands down.
It wasn’t quite “you’ve never had it so good”, but it was a bold defence of the coalition’s stewardship of the economy.
Is the claim true? Let’s take the three elements one by one.
The claim is vague enough to give Mr Osborne a good bit of wiggle-room. Which countries does he mean when he says “the major advanced economies”? And what time-scale are we talking?
If he means the G7 group of economies, and he sticks to figures from this year, the chancellor is right. Real GDP growth is estimated at 2.9 per cent in 2014, according to the International Monetary Fund.
That’s better than Canada, France, Germany, Italy, Japan and the US.
If we look at 2013 figures instead, Britain’s growth is slightly behind Canada and the United States.
There are smaller countries and emerging countries like India and China where growth far outstrips that of the UK.
Britain’s employment rate is among the highest of the major developed economies, although there are slight differences in the way the figures are worked out in different countries.
The Office for National Statistics has the UK rate at 73 per cent – that’s the proportion of economically active people in employment.
The rate is exactly the same in Germany but lower in every other G7 country.
Britain’s employment rate has gone up by 1.3 per cent in the last year, a growth rate that beats Germany, the other G7 nations and almost every country in the EU.
A bit more tricky to measure, if we don’t know what time-scale the chancellor had in mind.
But there are statistics that support the view that the UK deficit has been shrinking faster than in our G7 cousins/deadly rivals too.
OECD figures have the UK deficit falling from 10 per cent of GDP to a projected 4.1 per cent between 2010 and 2015. That’s an impressive pace of reduction, bigger than Canada, France, Germany, Italy and Japan.
But of course most of those countries weren’t in as bad a position to begin with, and in any event, the United States cut its deficit faster over the same period.
This was a bold, if deliberately vague, claim.
It is possible to pick holes in it, particularly on deficit reduction, but Mr Osborne is broadly right to say that Britain’s economy and our employment rate are growing faster than most other major economies, and the deficit is being cut relatively quickly at the same time.
Remember that deficit and debt are different. If I spend £10 more than I earn at the end of the year, I’m running a (tiny) annual budget deficit. The shortfall adds to my running total of debt, which if I include mortgage, credit cards and so on is pretty terrifying.
Britain’s deficit is getting smaller, but the pile of national debt is still growing. The Office for Budget Responsibility (OBR) says national debt will reach a scary-sounding £78.7bn in 2015/16. Even higher numbers are used for international comparisons.
Compared to other advanced economies, Britain’s debt-to-GDP ratio is towards the high end of the scale but slightly less than America, France and Italy and way behind massively debt-burdened economies like Greece and Japan.
The OBR predicts that net debt will peak in 2015/16 before beginning to fall slowly. But it won’t last forever.
Both the OBR and the IFS think debt will start to grow again in the long term as future governments are forced to spend more on the needs of an ageing population.
This is a bit unfair to Labour.
The “independent experts” are the IFS again, who compared the spending plans set out by the Tories, Labour and the Lib Dems a couple of weeks ago.
It’s true that Labour has a looser fiscal target than the Conservatives. On the latest forecasts, George Osborne’s policies will create a surplus of 1.5 per cent of national income in 2018–19.
The shadow chancellor, Ed Balls, also says he wants to cut the deficit. But he has been vague about the timing and the size of the surplus, saying: “We will get the current budget into surplus and the national debt falling as soon as possible in the next parliament.”
This means Labour does not have to hit the current forecast of a surplus by 2018/19, and it doesn’t have to be as much as 1.5 per cent of GDP. So Mr Balls could spend more and still keep his promise – balancing the books by an unspecified point in the next parliament.
That 1.5 per cent of GDP equates to about £28bn, hence Mr Osborne’s accusation, but Labour has not actually said it will spend this amount.
The party has simply left itself a bit of wiggle room, giving itself the freedom to spend more or tax less. It might choose not to do either of those things and over-achieve on its target.