As explained this week by Spectator Editor Fraser Nelson, most Britons confuse the concepts of deficit and debt and politicians and the media don’t help to resolve the confusion.
To put it simply, the deficit is the amount that the British government borrows every year to balance the budget. This amount has fallen slightly as a percentage of GDP.
But the debt is the total amount the government owes and this amount is rising steadily and will rise a further £600 billion by 2015.
So the fact is that despite all the coalition government’s austerity measures our deficit is rising at such a rate that Britain will have the worst deficit in the Western world by 2015 (see chart). And this means that our national debt is getting bigger, bigger and bigger every year.
As Nelson says, ‘The word “deficit” is to blame. It’s a wonk word, that normal people don’t use – at home or at work. If most people had to guess, they’d say “deficit” is another term for “government debt.” When MPs say “we’re cutting the deficit,” most people hear “we’re cutting the debt.”’
But this is not so at all.
Nelson adds, ‘In America, broadcasters tend to use more straightforward vocabulary like “balance the books” and “stem the rise in debt.”’
One wonders if the use of this confusing language is not just incompetence in communication but rather a deliberate ploy to pull the wool over the eyes of British voters and tax payers.
Anyway here’s the poll, sample 2,002 adults… showing that only 6% got the right answer. This you tube video explains it graphically clearly and simply. It should be compulsory viewing.
Which of these statements do you believe to be the most accurate?
49% - The Coalition Government is planning to REDUCE the national debt by around £600 billion between 2010 and the end of this Parliament in 2015
14% - The Coalition Government is planning NEITHER TO REDUCE NOR INCREASE the national debt between 2010 and the end of this Parliament in 2015
6% - The Coalition Government is planning to INCREASE the national debt by around £600 billion between 2010 and the end of this Parliament in 2015
31% - Don’t know
There is a fascinating website called UK Debt Bombshell which starts as follows:
Britain owes over £1 trillion. It's real, it's ours… and we've got to pay it back. It's a truly frightening figure. Why is the world's sixth richest country so deeply in debt?
Every year the UK runs a large budget deficit. The Government spends more money than it can tax, so we plug the gap by selling bonds to investors at home and abroad. These bonds - known as gilts - have to be repaid in full, with interest. Added together, our unpaid loans make up the UK's national debt.
Right now, that debt is growing violently. The Government forecasts it will soar to an eye-watering £1.5 trillion by 2016. To put that in perspective, the UK went bust in 1976 running a budget deficit of 6% of GDP. In 2012 that deficit is going to top 8.9%.
•We owe £17,324 for every man, woman and child
•That's more than £38,086 for every person in employment
•Every household will pay £1,924 this year, just to cover the interest
The figures on the site are a little out of date but it tackles the following questions in a very straightforward way. Well worth a look.
Q: Why is Britain in so much debt?
Q: Who do we borrow all this money from?
Q: How is national debt measured?
Q: What are we spending the money on?
Q: Does it matter how government spends the money?
Q: How will national debt affect our future?
Q: Is the problem getting better or worse?
Q: What can we do to prevent a debt crisis?
Q: Has Britain always been in so much debt?
Q: Is it right for us to borrow and spend like this?
Q: Are we really printing money?
Q: What are your sources of information?
The Good Book says, ‘The rich rule over the poor, and the borrower is slave to the lender.’ (Proverbs 22:7). It also says, ‘The wicked borrow and do not repay, but the righteous give generously’ (Psalm 37:20-22).
How are we personally responding?
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