Is the deficit down by two thirds?

“I will be taking out to the country in this campaign a proud record of a Conservative government: … an economy with the deficit nearly two thirds down.”

Theresa May, 19 April 2017

“In 2010 they promised to eradicate the deficit by 2015. In 2015 they promised to eradicate the deficit by 2020.”

Jeremy Corbyn, 19 April 2017

This is correct, looking at the deficit as a proportion of GDP, and is a claim the government has made before.

Public sector net borrowing went from 9.9% of UK GDP to 3.8% between 2009/10 and 2015/16. That’s a decrease of just under two thirds. This year it is forecast to be 2.6%.

‘Public sector net borrowing’ is the headline measure of the government’s budget deficit. It’s the difference between the government’s income (mainly taxes) and everything it spends on public services, investment, and debt interest.

Borrowing as a proportion of GDP decreased because the amount the government borrowed over this time fell from £166 billion to £72 billion (in 2015/16 prices). At the same time the UK’s GDP also increased.

Unmet targets

But the deficit didn’t fall as far as planned, as Mr Corbyn pointed out.

Mr Corbyn’s underlying point is correct: the government set deficit targets in 2010 (which it didn’t meet) and in 2015 (which it abandoned).

But when the government said it would balance the deficit by 2015 and create a budget surplus by 2020 it wasn’t referring to the same measure each time.

In 2010 the government promised to eliminate the “cyclically-adjusted current balance” by 2015/16.

This measure of the deficit ignores investment spending. It’s also adjusted to take into account whether the economy is in a ‘boom’ or ‘bust’ period.

The government is now forecast to achieve that in 2018/19, three years later than the original target.

In 2015 the government updated its plans and aimed to have a surplus on public sector net borrowing by 2019/20. This is the wider headline measure we discussed above, which unlike the 2010 measure includes investment spending and isn’t cyclically-adjusted. This means that the government would have to reduce spending by more than under the previous target.

The government isn’t forecast to achieve this within the next five years, and new targets were set by the Chancellor last autumn.