Tuesday, 7 September 2010

The real source of the deficit

Again and again we are told that too much public spending has got us into trouble. It just is not true.

Economist Michael Burke uses the Treasury's own figures to counter the government's line that Labour's over-spending is to blame for the deficit.

He shows that "66% of the entire public sector borrowing requirement" arises from "plunging tax receipts". The other major cost was the bank bailout. Increases in public spending made only a small contribution to the deficit. He also notes that tax receipts "averaged 37.6% during Labour’s entire period of office, compared to 42.4% under Thatcher" and concludes that "Labour taxed much too little, much less than Thatcher."