How Much Do You Know About The Deficit?
Arguably the defining context for the Coalition is The Deficit. I say arguably because I believe the sub context of Reducing the State will have a far the bigger impact in future years. Anyway I digress.
If The Deficit is the defining context how much do we know about it?
One of the ‘joys’ of politics is politicians taking complex issues and trying to distil them into simple emotionally based tag lines. Things like ‘Benefit Claimants are all scroungers’, ‘Every young person who wears a hoody is a thug’ you know the sort of thing I mean. For issues as complex as The Deficit you need to distil it to a concept that can be easily understood by the ignorant masses. Of course the one beloved of Coalition politicians is the good old family budget. You know.. If the family is in debt it has to tighten it’s belt etc.
So lets get away from the simple sound bite and compare The Deficit to The Family Budget.
There are two determinants to family debt problems:
- The size of the debt
- The income to support the debt
You get a debt problem if the ratio of the debt to income becomes unmanageable. The higher the ratio of debt to income the bigger the problem.
The average size of household debt in the UK is around £60,000, the average Gross Domestic Household Income (GDHI) is £30,000 (figures are rounded and sources are below).
The Deficit is £1,000,400 billion and Gross Domestic Product (GDP) is £1,403,000 billion.
Therefore the debt ratio for the family is 200% of income. For the country it is 71.3%. So the average family debt problem is almost 3 times worse than The Deficit!
What is the average family’s response to this huge problem? Are they forcing their workshy children to dig ditches for a £1 an hour? Are they slashing their spending amid cries of ‘we have to reduce our debt right now before we are declared bankrupt like that nice Greek family down the road!’. Of course not. ( Incidentally if we reacted proportionally as families in the same way as the Coalition has to it’s debt, economic growth and with it the capitalist system would collapse.)
I am aware that at this point I could be accused of being a deficit denier. That is not my point. My point is twofold. Firstly to compare national macro economic policy to family finance is deliberately misleading the public. My second is that the Coalition are desperate to talk up The Deficit so that the public are blinded to the sub context of Reducing the State more effectively than Margaret Thatcher could ever have dreamed of.
<http://www.walletpop.co.uk/2010/05/05/personal-debt-rises-again-now-at-1-460-billion/> Family Debt
<http://www.statistics.gov.uk/cci/nugget.asp?id=277 UK Deficit and GDP
<http://www.statistics.gov.uk/CCI/nugget.asp?ID=1552&Pos=1&ColRank=2&Rank=1000 GDHI
