Ed Miliband's Myth about a Myth

This morning I read in The Times that Ed Miliband is angry that the coalition is perpetuating the 'myth' that the deficit is the fault of the previous Labour Government, whereas, he says, it was the fault of the recession.

It's pure and simple really.

The effects of the previous Government's spending is what can be seen in the structural deficit (this is the amount that the Governments spend minus its income if there were not a recession). Normally the structural deficit would not be entirely down to the Government, but the last Government had a good spell early on and actually ran a surplus for some years, it then went on a spending splurge and the deficit got wider and wider, even during a period of growth.

There is of course an amount of the deficit because of the recession, this is the non-structural part, but this can be reduced when the country returns to growth due to the 'automatic stabilisers'. In recession, tax receipts are down and unemployment benefits go up, in growth these trends reverse.

So, to judge Ed Miliband's 'myth' let's look at the total numbers. The total budget deficit for this year was due to be £155 Bn, the structural deficit is predicted (by the IFS) to be around £90 Bn of that, i.e. 58%. I believe that the structural deficit reduction plan is nearer £100 Bn or 65%.

Either way, the majority of the deficit is structural and therefore a fault of the previous Government. So, Ed Miliband's 'myth' is a myth itself.

He also said, in the article, that he is not opposing every cut. Which cuts does he support then? No answer.

He opposes the VAT rise, which brings in £13 Bn per year, but what is his alternative? The employer NI rise, that the new Government stopped, only brings in £3 Bn, and there's some loose talk about bank bonuses but nothing tangible. Also, given that Labour want to put the deficit reduction burden further onto taxes (from 80:20 cuts to taxes to 60:40) where are all the extra taxes coming from? There came no answer.

Verdict. Ed Miliband must do better.

Squiffy.