June 1, 2011 • 1:53 pm


The state visit of Barack Obama last week prompted much speculation over whether or not the President would endorse the Coalition Government’s deficit reduction plan.

In the final reckoning, both sides of the economic argument claimed some sort of victory. However Labour’s Shadow Chief Secretary to the Treasury Angela Eagle was particularly striking in staking a claim to the President’s endorsement. She argued that it was little surprise that Obama had shied away from backing the Prime Minister on the issue, as “no other major economy is cutting as far and fast as the UK.”

To regular Full Fact readers, this might seem a curious claim. We factchecked reports last week that the UK was actually making smaller cuts to public spending than other European nations, and found that on the strength of OECD data, they were broadly accurate.

So is there another way of looking at this data?

We got in touch with an adviser to Labour’s economic team to find out more, and he pointed us towards the Institute for Fiscal Studies’ (IFS) 2010 Green Budget. Sure enough, table 6.1 of the IFS analysis shows that the UK is expected to see the third largest reduction in government expenditure of the 29 developed nations between 2010 and 2015, behind only Ireland and Iceland, which are not usually grouped amongst the “major economies” of the world

So how have the IFS and CEBR reached such different conclusions about the relative severity of the cuts in Britain and the rest of the developed world?

Firstly it is worth noting that the IFS analysis is based on a different dataset to the CEBR report, using forecasts provided by the IMF rather than the OECD.

This is significant, because slight differences in these estimates have some rather profound effects on the analysis. Whereas the OECD anticipated a 2.2 per cent reduction in public spending as a share of GDP between 2010 and 2012, the IMF expects a 2.6 per cent cut. This would not only place it above the Eurozone average in the CEBR’s report, but also above other “major” OECD economies.

Furthermore, where the OECD data only estimates public spending to 2012, the IMF has made predictions stretching to 2015. Again, this longer time-frame reveals deeper cuts in the UK compared to other major economies than the shorter-term picture might suggest, as the graph below demonstrates:

It is worth noting here that the IMF does express some uncertainty about their more far-reaching predictions, highlighting the fact that most countries have not yet announced their fiscal plans beyond 2013: “Fiscal plans typically cover the period until 2013, but few countries have identified a long-term debt objective. Most economies have set out targets until 2013 for the overall balance, although a few go beyond, until 2015 (for instance, the United Kingdom and the United States).”

Furthermore, the IFS in their Green Budget presents the data in a time-frame that encompasses recent spending increases since 2007, which would act to mitigate the relative scale of the impending cuts: “The IMF’s forecasts suggest this would result in the UK seeing the 9th smallest increase in government spending as a share of national income between 2007 and 2015, and maintaining its mid-table position with the 19th highest level of government spending in 2015.”

However it does seem that the different portrayals of the scale of spending cuts faced by the UK offered by Angela Eagle and the CEBR can both be correct within their particular frames of reference. Winston Churchill famously complained that when he asked six economists for their views, he received seven different opinions; in the ongoing fiscal debate this seems as pertinent an insight as ever.

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