The Conservatives’ plans to tackle the deficit seem to have taken a backseat while Brexit sits at the steering wheel. Can the Conservatives eliminate it?
According to the BBC, in 2010, the Conservatives promised to eliminate the deficit by 2015. Contrast this with the party’s 2017 promise to eventually eliminate the deficit by the middle of the following decade – that’s a whole ten years later than in their initial planned elimination date.
Before discussing how close the Conservatives are to completing this task, it is worth pointing out the difference between debt and deficit, two related terms which are so often confused. The budget deficit is the difference between what the government spends and what the government takes in within the course of a year - when spending is higher than government income. Excess spending is made up with borrowing, which means that the government will need to pay this back. Each year, that excess spending is added up – the total of this excess spending over decades is the debt. And if income exceeds expenditure then the government records a budget surplus.
So, how close are they to achieving their goal of deficit elimination?
Government budget deficit is often measured as a percentage of GDP as it is a better reflection of how much the government really owes, especially when countries are compared because different countries are different economic sizes.
New Labour started their term in office with a small deficit, when soon turned into a slight surplus. The economic crash in the later part of the last decade changed everything – government receipts fell and spending increased to bail out the banks and account for welfare spending on the newly unemployed.
Then the Conservatives came to power in 2010, and since then the deficit has been smaller – almost – every year.
In 2014, it was 5.7% of GDP, then 4.3% in 2015 and 3% last year.
And in non-GDP terms, Britain’s 2016 budget deficit stood at £40.37bn down from the £99.74bn recorded in 2010, according to UK Public Spending statistics.
The Conservatives are certainly on track to eliminate the deficit, but how long will it take? With continuous target delays, are Theresa May and Philip Hammond, and their predecessors Cameron and Osborne, really the party of budget surpluses and low taxes?