In a remarkable article in Thursday’s Evening Standard, Liam Fox made a persuasive case for the facts to be brought into political discourse – but not in the way he intended. The article was headed, “the Tories must be brave enough to tell hard truths to voters.” And Fox proved his point with an extraordinary series of half-truths and outright falsehoods.
Fox (if he wrote it) is quite right in his headline assertion that the Tories must be brave enough to tell the truth. Far too much political discussion operates at the level of spin, deliberate misrepresentation, or even unfounded falsehood.
But Fox then proceeds to prove his case through an extraordinary series of false assertions. The chart below summarises his top 10.
Source: The 99% Organisation
Not one of the 10 rises to the level of approximate truth.
Here are Fox’s top 10:
- “[The Chancellor] was tempted …to …improve the flow of money into the most sensitive areas of public sector…to soothe some of the pain felt after years of necessary financial restraint”
- “…more money for schools, social care, policing and the NHS…maintain the appearance of financial responsibility”
- “budget deficit was 10%, the highest level in peacetime”
- “The interest the Government will pay on debt will be an astounding £41.6 billion”
- “the sort of spending with wild abandon that is the hallmark of socialist governments”
- “there was and is a strong economic case for bringing [debt] down faster”
- “The Chancellor has… been able to raise spending by £13.8 billion and (just) remain within the Government’s own economic rules”
- “the bottom line is that conservatives manage the economy better”
- “there never has been a Labour Government that didn’t leave office with higher unemployment than it started”
- “in the end there is no money but taxpayer’s money… they may be old truths, but they are better than socialist lies”
In his article, Fox, like a nervous racehorse, begins cautiously, feeling the ground with a mixture of spin and deliberate misrepresentation – but then he comes through strongly in the final furlong with five completely unfounded falsehoods. Let’s take them one by one.
“… years of necessary financial restraint”
While it is true that there have been years of what Fox calls ‘financial restraint,’ and everybody else knows as austerity, it is quite untrue that austerity was necessary. The argument for austerity was based on the state of Government finances. As David Cameron put it,
“To every mother, father, grandparent, uncle, aunt – I would ask this question. When you look at the children you love, do you want to land them with a legacy of huge debts?”
Who could fail to be moved?
Or as Edward Winder wrote in The Independent in 2015,
“Economic circumstances dictate that ‘austerity’ is absolutely necessary. Britain’s national debt currently stands at a horrifying £1.5 trillion. When interest rates inevitably rise, continuing to ‘borrow to invest’ will quickly become unsustainable as this number rockets ever higher; it should not be controversial to assert that this is downright irresponsible.”
And when supported by charts like these, the argument seems irrefutable.
But what about when supported by a chart like this?
The chart shows that the debt spikes up whenever there is a major economic shock. You can see the Napoleonic Wars, the two World Wars and the Global Financial Crisis. But critically, having spiked up is no barrier to economic growth: Debt to GDP was over 200% before the Industrial Revolution really took hold and over 250% before the Golden Age of Capitalism.
The national debt is not, and was not, “huge” or “horrifying;” it was not even rather high; it was not average; it was below the average level for the last 300 years. It certainly did not justify almost a decade of destructive austerity.
Austerity was always a political choice. It was never an economic necessity. Indeed, the majority of economists believe that it was a serious economic mistake.
SCORE: DELIBERATE MISREPRESENTATION
“…maintain the appearance of financial responsibility”
Of course, it would be desirable for Javid to have maintained the appearance of financial responsibility. As the Financial Times reported, however, “economists say spending pledges cannot be met within deficit limit of 2% of national income.” In other words, it is clear to informed observers that Javid has broken the ‘rules’ the Tory party defined for itself. The appearance of financial responsibility has been sacrificed on the altar of electability.
SCORE: DELIBERATE MISREPRESENTATION
“budget deficit was 10%, the highest level in peacetime”
By some accident, a figure which is almost correct has crept into Fox’s article. As the chart below shows, the public Sector Net Borrowing Requirement (PSNBR) did approach 10% during the Great Recession that followed the Global Financial Crisis.
Source: Bank of England
As the chart makes clear, in times of serious recession, it is not unusual for the PSNBR to be between 5% and 10%, and during wartime it can rise to over 30%.
In the aftermath of the Global Financial Crisis, described by the Deputy Governor of the Bank of England as, “possibly the largest financial crisis of its kind in human history”, the level of borrowing approached 10%. Fox’s implication that this represents some kind of fiscal profligacy is ludicrous. But since he only implied this rather than stating it explicitly:
SCORE: SPIN
“The interest the Government will pay on debt will be an astounding £41.6 billion”
Source: House of Commons Library
The graph above shows the cost of interest payments on government debt since 1955. As you can see, there is nothing ‘astounding’ about the current levels: as a proportion of GDP, the cost of servicing debt remains historically low.
SCORE: DELIBERATE MISREPRESENTATION
“the sort of spending with wild abandon that is the hallmark of socialist governments”
In 2007, after 10 years of strong economic performance, the Tory party did not even hint that they felt that Labour had been spending with wild abandon – in fact they pledged to follow the Labour party’s spending plans.
SCORE: DELIBERATE MISREPRESENTATION
“there was and is a strong economic case for bringing [debt] down faster”
By this, Fox means that there was a strong economic case for more aggressive austerity. In fact, different countries adopted a different approach to the aftermath of the global financial crisis, and this gives us a kind of natural experiment to test the impact of more aggressive austerity empirically. Here are the results of that experiment.
Source: WEO database, IMF, World Bank, OECD
We could have had more aggressive austerity, and we could have shrunk our economy more – but there is no economic case for doing so.
SCORE: UNFOUNDED FALSEHOOD
“The Chancellor has… been able to … remain within the Government’s own economic rules”
This is the same point he made earlier about maintaining an appearance of financial responsibility, except that this time he has been explicit about remaining within the Government’s own rules whereas before, he merely implied it.
SCORE: UNFOUNDED FALSEHOOD
“the bottom line is that conservatives manage the economy better”
Whether one looks at the long-term – comparing the performance of the Golden Age Of Capitalism (1945-1980) with that of the age of Market Capitalism (1980-2015) ushered in by Margaret Thatcher’s reforms – or the short term, what the statistics show is that conservatives manage the economy worse.
Here is the long-term picture.
And here is the comparison between the 1997 – 2010 Labour government and the post-2010 Tory government.
Both in terms of overall economic growth and – more importantly – the typical working person’s income, the official statistics say that the Labour party has managed the economy better. That is the bottom line.
SCORE: UNFOUNDED FALSEHOOD
“there never has been a Labour Government that didn’t leave office with higher unemployment than it started”
This is possibly the most breath-taking of all Fox’s claims. Since 1979, the Conservative party’s record on unemployment has been utterly dismal. Margaret Thatcher never managed to bring unemployment down to the level she inherited from Labour, it only returned to that level under Tony Blair; and it never subsequently rose to the level at which the Tories had left it.
Source: ONS
SCORE: UNFOUNDED FALSEHOOD
“in the end there is no money but taxpayer’s money”
In the UK, as in other advanced economies, we operate a fiat system in which money can be created out of nothing. In fact, as the Bank of England explains, the vast majority of all money is created out of nothing by commercial banks. And the Bank of England itself creates money via quantitative easing (QE).
In the aftermath of the financial crisis, in order to stabilise the economy, the Bank of England created £435 billion of QE, and the government also provided guarantees to the banking system which peaked at £955 billion in value.
Source: Bank of England, NAO
As the chart shows, in combination the government demonstrated an ability and willingness in times of need, to create money equivalent to more than 11 years of the total budget of the NHS. None of that money was raised through taxation.
SCORE: UNFOUNDED FALSEHOOD
Does this really matter?
It is tempting to shrug one’s shoulders and say, “well, we all know that politicians lie.” But exaggerating what one will deliver and the risks of one’s opponent’s manifesto as politicians tend to do is a different matter from complete misrepresentation of historical facts. When voters vote, they do so on the basis of information provided to them by politicians and by the mainstream media. Very few have the time to check independently. Even though I have much of the data at my fingertips, it took many hours to assemble this rebuttal.
When politicians go post-fact to this degree, it becomes almost impossible for voters to make a rational decision. And if they cannot make a rational decision, then democracy itself is under serious threat.