Last night Channel 4 hosted the first pre-election chancellor debate since 1997 – and the FactCheck team were there to put the claims through their paces. Read our initial analysis here, and more new findings below.
All quotes are from Ask the Chancellors, Channel 4, 29 March 2010
The claim
“You can see that [Labour] took one of the strongest countries and strongest economies in Europe and now we have one of the weakest economies in Europe. We were the last out of recession.”
George Osborne MP, Shadow Chancellor
The analysis
Lies, damned lies and statistics, so the saying goes. With news reports of deals to rescue the Greek economy and struggles in other Eurozone countries, it seems hard to believe that the UK economy is among the weakest in the European Union.
We asked the Conservatives what their claim was based on. They pointed out that the UK economy has contracted 6.2 per cent, and showed six quarters of negative growth – the longest and deepest recession on record. “All the other G20 nations, including the US, France, Germany and Japan resumed growth before the UK,” the party said. They also said that Britain has dropped from seventh to thirteenth in the international competitiveness league under Labour, according to the World Economic Forum’s Global Competitiveness Report 2009-2010.
We put the Tories’ original claim to an economist, Andrew Goodwin from Oxford Economics, who said: “There are a number of different tests and the result would be different on each one.”
Looking at when the UK officially came out of recession (defined as two quarters of negative growth in the economy) it is true to say that the UK was one of the last out. But, Mr Goodwin points out, some other countries did dip out of recession only to fall back into it later.
If it was measured on public finances, then it would be “indisputable” that the UK is in a worse state than Labour inherited 13 years ago, but there are many other component parts that make an economy weak or strong.
Yet another measure could be to compare GDP on a per capita basis (at market exchange rates). Oxford Economics compared the UK on this measure to other G20 countries for FactCheck. Yes, on this measure they found the UK sank from second to seventh on the list in the last two years, behind Australia, the US, France, Germany, Canada and Japan.
But, Mr Goodwin says, there is a sizable gap between Italy in eighth place and South Korea in ninth place. And if you skew this to take into account the cost of living, the UK fares rather better, maintaining fourth place on the table.
And under these measures of GDP per capita the economy is still stronger than it was in 1997.
So – based on one set of statistics Osborne’s claim is true – however he could cherry pick from a plethora of statistics to suit his purpose and get a different answer each time.
The claim
Do you agree that cuts we are going to be facing will be deeper than the cuts that Mrs Thatcher had to put through Britain?” Krishnan Guru-Murthy
“Well I said last week they’re going to have to be pretty deep.” Alistair Darling MP, chancellor of the exchequer
“The answer is yes.” Vince Cable MP, Lib Dem treasury spokesperson
“The answer is yes.” George Osborne MP
The analysis
The chancellors all agree – and so do we. Contrary to popular belief, total public spending increased slightly under Margaret Thatcher. When the effects of inflation are stripped out, it went up by an average of 1.1 per cent a year.
No such increase on the horizon now. According to last week’s budget, total spending will stay flat in real terms over the four years after 2010-11.
When we factor in the likely costs of the things like welfare payments and national debt interest, the prognosis for public services looks particularly grim. The Institute for Fiscal Studies estimates the flat overall settlement would translates as a cut in spending on public services of 3.1 per cent a year – and more in the areas the government hasn’t pledged to protect.
The claim
“George, last week you went round denouncing these government-supposed efficiency savings as complete fiction – which, frankly, a lot of them are. You are now using these fictional savings to finance your tax cut.”
Vince Cable MP
The analysis
Yesterday the Conservatives claimed they could find £12bn of efficiency savings, based on advice from two former government waste-trimmers. We’ve looked at the Tories’ plans in more detail here.
But just last week the government also described how it would save £11bn through waste-trimming “efficiency savings”. Osborne duly rounded on the plans, telling parliament they were “completely bogus as the answer to the question of the spending review”. He also quoted extensively from comments made by civil servants to FactCheck, saying the savings were “deliberately vague”. Watch the video here.
The claim
“If we’d been doing a spending review 12 months ago, unemployment was [predicted to be] about a million more than has turned out. ” Alistair Darling MP
The analysis
Unemployment hasn’t been as bad as was widely feared when we entered recession – but has Darling called the gap right? Compare two sets of independently audited projections for the number of people claiming unemployment benefit: firstly, from budget 2009, which predicted it would rise “from recent levels of 1.39 million to 2.09 million at the end of 2009, and to 2.44 million at the end of 2010”.
Fast forward to last week’s budget. The comparable forecasts said unemployment would rise from 1.62 million at the end of 2009 to 1.74 million at the end of 2010.
So the claimant count was 470,000 lower at the end of 2009, than had been predicted at the last budget. Should the chancellor not have said unemployment turned out to be half a million less than expected, rather than a million? That’s certainly how the average viewer might understand his comment.
The difference between the two forecasts widens if you compare the figures for the end of 2010 instead – perhaps not unreasonable when we’re talking about spending predictions. Unemployment is now forecast to be 700,000 lower by the end of the year, than it was expected to be a year ago.
We asked the Treasury to clarify exactly where Darling got the million from. A spokesperson said the chancellor was talking about the 700,000 difference between the two end of 2010 forecasts – multiply this by the three years of a spending review period, and the cumulative total of people on unemployment benefit would be more than two million lower than predicted at budget 2009.
So we don’t feel much the wiser about why Darling used a million rather than one of the other, more accurate figures – but you could argue his claim was an under-exaggeration rather than just a bit of outright spin.
The claim
“Three-and-a-half million low paid workers and pensioners would be lifted out of tax altogether.”
Vince Cable MP, Lib Dem treasury spokesperson
The analysis
Vince Cable claims that raising the income tax threshold to £10,000 would take about 3.5 million people out of taxation altogether, a policy that was unveiled at the Liberal Democrat party conference in September 2009.
The Lib Dems calculated the 3.5mn figure using projections for 2009-2010 in the 2006-07 Survey of Personal Incomes – the most up to date available at the time.
Table 2.5 of the personal tax tables shows there were 990,000 people earning more than the £6,475 tax threshold and less than £7,500. Add this figure to 2.65 million people earning between £7,500 and £10,000 and the total comes to 3.64million.
The very latest figures, published in January 2010, show that there were 3.68 million income taxpayers earning between the current threshold and £10,000 in 2009-10.
So it looks like Vince Cable has lived up to his reputation for transparency and honesty this time. But what do others make of his claims?
We asked the TaxPayers’ Alliance and the thinktanks Reform and the Adam Smith Institute to look at the figures. All three agreed that the figure Cable has come up with is reasonable.
But the thinktank Reform points out that with the proposal likely to result in an estimated £16.2bn loss in tax revenue, it is not the most cost-efficient way to take individuals out of the tax system. It says the majority of those who would benefit from the change would be individuals with taxable incomes of above £10,000 – not the people on the lowest incomes.
Based on Reform’s estimates around 15 per cent of the benefit from increasing the personal allowance to £10,000 would go to individuals with incomes of £10,000 or below and 85 per cent to individuals with incomes higher than the new threshold. Therefore there would be a large spillover to people who were not in need.
The claim
“Average taxpayers would get a tax cut of £700 per year.” Vince Cable MP
The analysis
According to Vince Cable’s team anyone earning between £10,000 and £100,000 would benefit to the tune of £705 from their plans. That’s anyone earning above the income tax threshold proposed by the Lib Dems and below the level where the personal allowance is removed completely.
Those earning more than £100,000 would get fewer benefits because personal allowances are phased out above that level. People earning above £112,950 would get no benefit at all from the change.
Team Cable says the £705 figure is 20 per cent of the difference between the level of the current threshold and the proposed threshold. The difference is £3,525 and 20 per cent of £3,525 is £705.
With the median taxpayer earning just under £20,000 and the mean average taxpayer income just over £28,000, it seems that Vince Cable’s claim is correct on both measures.
Those aged over 65 will get some benefit, but less, because their tax allowance at £9,490 is already higher than a younger person with the same income.
