The deficit is lower than it was 12 years ago

In her speech at the Labour party annual conference today, shadow chancellor Rachel Reeves claimed that the Conservative government has failed to reduce the debt and deficit during its 12 years in power.

She said: “Have they even got the debt and deficit down? No … It’s 12 years of failure.”

It’s true that UK public sector debt—the amount of money owed by the government, measured as a percentage of the size of the economy (GDP)— has increased from 62.4% of GDP in the 2009/10 financial year to 95.5% of GDP in the 2021/22 financial year.

However, the change in the deficit— which refers to how much more, each year, the government spends than it brings in through things like taxes— is more complex.

According to the Office for Budget Responsibility (OBR), in 2009/10, before the Conservative-Liberal Democrat coalition government came to power, the deficit stood at 10.1% of GDP.

Over the course of the following decade this figure fell, reaching a low of 2.0% by 2018/19 before increasing to 14.4% in 2020/21 during the Covid-19 pandemic.

The latest full year of data from 2021/22 put the deficit at 6.1% — four percentage points lower than when the Conservatives entered government in 2010.

The OBR forecasted a deficit of around 3.9% for the 2022/23 financial year, in its latest data, though this was before the recent government announcements. It has not yet updated its deficit forecast, but the National Institute of Economic and Social Research forecasts the deficit will reach 8%.

But ultimately, all of these figures suggest the deficit is lower than it was when Labour left office.

That said, the deficit in 2009/10 partly reflected the impact of the financial crisis on public finances. On average, during the 13 years of Labour government, the deficit averaged 2.7% of GDP. In the subsequent 12 years it has averaged 5.7%.

We’ve contacted Labour for comment.

Image courtesy of Chris McAndrew