Tuesday, November 11, 2008

Right Up There With Pakistan, Egypt and Hungary

Get a large magnifying glass (or click on table)

During his press conference to launch the Tory tax package this morning, Dave repeated the line that Brown is already running a bigger government deficit than any country except Pakistan, Egypt and Hungary.

We've always slightly wondered if that can be true. For example, doesn't Bush's Big Government US borrow more? So we've done some digging.

The usual sources (OECD and IMF) aren't much help, since they only routinely publish budget figures for the major developed economies. Although we do note in passing that both have the US running a bigger deficit than us this year (% of GDP).

We turned instead to the excellent summary table produced by the Economist (above). It covers both developed and emerging economies, drawing on the extensive country expertise of the Economist Intelligence Unit. And here's their budget deficit league table for 2008 (all figures are percentages of local GDP):
  1. Egypt 7.1%
  2. Pakistan 6.7%
  3. Malaysia 4.8%
  4. India 4.3%
  5. Ireland 3.9%
  6. Hungary 3.8%
  7. UK 3.8%

So we're already tied sixth worst in the world alongside Hungary. Which is pretty much what Dave and George have been saying.

And just for the record, here's how a few of our direct competitors stack up:

  • US 3.2%
  • Japan 3.0%
  • Germany +1.1% (ie Germany has been running a budget surplus)
  • France 2.9%
  • Euro Area 0.9%
  • China +0.4% (ie in surplus - at least pre their stimulus package)

There's no doubt we are in bad budgetary shape. And as borrowing racks up, the judgement of the bond and currency markets will not be kind.

PS So what do we make of the Tory tax breaks? Clearly, we welcome them. In particular, taxes on employment are always a bad idea, and any reduction is A Good Thing Ltd. Whether the cut in employers' National Insurance would be self-funding as billed seems dubious - that would require one-third of the new jobs to be net (ie jobs that would not otherwise have been offered), and in a steep recession a £2,500 break may not be enough to secure that. But right now, we're less concerned about the funding. We're much more interested in whether - as the ever helpful Mr Humphrys almost suggested this morning on BBC R4 Today - Cam might see his way to incorporating lower job taxes into a longer term strategy for economic revival.

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