Policy Research in Macroeconomics

Conservative budget deficits – on average, they’re over twice the size of Labour’s!

The Daily Mail shrieks at us today: “Tories claim Labour wants to drop a spending bomb of unfunded promises worth £45 BILLION that would wreck the economy and hit national security”.  The story is of course complete rubbish – but aims to deflect attention from the Conservatives’s own stunning record of fiscal failure.  

We in PRIME have long argued that the huge reductions in public services and the social wage represent a much greater threat to our country’s civilisation and security than do budget deficits when the economy is under-performing, and all the more so at a time when governments are able to borrow at historically low interest rates.  There is absolutely no economic reason not to borrow reasonable sums for investment purposes – taking investment in a broad sense to cover spending which inures for the economic and social benefit of future generations (therefore including much education and health spending as well as infrastructure).

But this is General Election time so we have to endure the crudest propaganda – and we can be sure that the Conservatives will once again try to depict any commitment to social spending by other parties, and especially Labour, as evidence of dangerous fiscal irresponsibility.

So let us once more take up the challenge in its own terms (which wrongly assumes all deficits = bad), and look at the respective deficit-related records of the Conservatives (including the Con-led coalition) and Labour respectively.  We have ploughed this field before – see my post “Labour governments: more fiscally “conservative” than Conservative ones?” from 28 October 2015.  

This time we take the last 26 fiscal years – 13 of them with Conservative or Con-led governments, and 13 with Labour governments.  A level playing field!

We must warn readers at the outset in case they wish to look away – the Conservative record is not a pretty one to behold.

We have taken all figures from the databank of the Office for Budget Responsibility, with expenditure shown at 2015/16 prices, and starting with 1991/2.  This gives 6 years of Conservative government prior to 1997, followed by 13 years of Labour, and then by 7 years of Conservative(-led) governments.

We have first calculated the total amount (in billions of pounds) of the overall annual deficits (which includes borrowing for investment) incurred under Conservative governments during this 26 year period, and ditto for the years of Labour governments. (These are taken from the public sector net borrowing column).

We have then calculated the total amount, also in billions of pounds, of the current budget deficits for each, i.e. excluding borrowing for investment.  We believe this is a more sensible way of looking at the data, but the overall deficit is the one used in most public debate.

So here are the facts.

Overall deficits:

  • Conservative 1991/92 to 1996/97 (6 years):  £348 billion (average £58 billion per year)
  • Conservative 2010/11 to 2016/17 (7 years): £ 720.1 billion (average £102.9 billion per year)
  • Total Conservative overall deficits for the 13 years: £ 1068.1 billion (average £82.2 billion per year) – yes, over one trillion pounds in 13 years!
  • Total Labour 1997/98 to 2009/10 overall deficits for the 13 years: £496.4 billion (average £38.2 billion per year).

Current budget deficits:

  • Conservative 1991/92 to 1996/97 (6 years): £222.5 billion (average £37.1 billion per year)
  • Conservative 2010/11 to 2016/17 (7 years):  £457.2 billion (average £65.3 billion per year)
  • Total Conservative current budget deficits for the 13 years: £679.7 billion (average £52.3 billion per year)
  • Total Labour current budget deficits for the 13 years: £171.8 billion (average £13.2 billion per year).*


The average annual overall deficit under Labour during this 26 year period is less than half that of Conservative governments, taken separately and together.

The average annual current budget deficit under Conservative governments during this 26 year period is around four times as large as that of the Labour governments. The Major government’s average current deficit was nearly 3 times the average of the Labour government.

Moreover, the average Conservative Government annual deficit is almost double the size of today’s alleged Labour ‘bombshell’ – and the average Tory current budget deficit is also larger than the spurious ‘bombshell’!  

In short, the Conservatives since 1991/92 have a track record of huge budget deficits that is unique in our non-wartime history.  It’s time the spotlight was put on their record, not least because of the remarkable hypocrisy of their claims.

Annex – the OBR data


* this includes the single peak year of impact of the global financial crisis of 2009/10, when the deficit was £109.2 billion.  Apart from this year, the average current budget deficit under Labour was well under 0.5% of GDP.

12 Responses

  1. This is nonsense. Look how much Labour built up the debt and deficit before the Conservatives took over in 2010. The Conservatives couldn’t start at zero, they had to take on the rapidly rising debt and deficit of the previous government. Obama built up more debt than Bush but he had to deal with the mess Bush left him. You could argue that the financial crisis caused a lot of the debt but I think every government now has to make big spending promises to win an election and that’s not sustainable. One day, this is going to have to stop.

  2. We all know this doesn’t make sense. The Tori’s have cut spending but not cut Tax so deficit cannot be due to over spending.. So we need to know the real cause of the extra borrowing.

  3. Not a fair comparison as the conservatives got in after the 1990/2008 recessions and obviously tax revenue plummeted/govt exp rocketed due to higher unemployment/lower tax revenue. Labours spending plans were definitely higher so would have resulted in a much greater deficit if they were elected.

    1. You are wrong on a key point. The Conservatives "got in" in 1979 and remained in office till May 1997, first under Thatcher, then under Major, having won elections in between (including 1992). Major inherited a bad recession after the ‘bust’ of Chancellor Nigel Lawson’s induced boom – but that was NOT the legacy of a Labour government!

      You’re indirectly right in this, of course, that in the wake of the global financial crisis of 2007/8 government expenditure rose due to higher unemployment and lower tax revenue. As happened from 1991 on. Your last point I don’t accept, John Smith was quite a cautious ("conservative"!) Labour Shadow Chancellor prepared to raise tax on the better off. So no reason to assume higher deficit if Lab had won in 1992.

  4. Of course what this hopelessly simplistic analysis forgets is each government picks up the legacy of the last. At the very least, the first few years deficits following a change in government might more reasonably be attributed to the previous government’s policies than the new ones! Case in point when Tories last came to power inheriting the largest deficit legacy ever.

    Of course you cant argue that it was a Global issue, and not one of the Labour Govt’s making (which I’d have sympathy with), but that is an entirely different argument to the one that is being presented which is just ridiculous abuse of statistics to support an invalid conclusion.

    1. I think I made clear that this exercise was undertaken precisely because the Conservatives and their press use Labour deficits as a political propaganda exercise, and I was responding in that spirit: "So let us once more take up the challenge in its own terms (which wrongly assumes all deficits = bad)" . But please note, the early 1990s recession and deficits were those of a Conservative government after about 13 years of Conservative government at that time!

      To respond to your comment, I have also reworked the numbers to subtract the first 2 years of the 2010 Conservative-led government deficits, and added them on to the Labour government total. This subtracts around £270bn from the Con government total, and adds that to the Lab government total. This makes the Con total around £798 bn over 11 (instead of 13) years, average £72 bn. The Lab total goes up to £766 bn, but over 2 more years. This would give an average over 15 years of £51 bn per year. So even on this hypothetical basis, the Conservative government deficit is 50% greater than the average Labour one!

    2. You also then need to attribute the post-Major surplus to the Major government – especially as it was attained by Labour committing to Conservative plans for two years.

    3. No – this was Labour’s own choice. The point I responded to Jon Page over was that the post 2010 government did inherit a high deficit which was not a matter of choice – even Germany’s debt to GDP ratio shot up in the global crisis. But the government made its own austerity policy choice – and it WAS a choice – which slowed the recovery and kept the deficit higher for longer. So it seemed reasonable to see what the result would be if you calculate the first 2 years of the Cameron government on an "as if" basis – which of course still shows that the Conservatives are, shall we say, certainly no better than Labour, and statistically "worse" on their deficit record.

      But as I said in the article, deficits are usually not so much the problem in themselves –
      and with the right policies, at least the current budget deficit tends to disappear or decline greatly. It is the political abuse of deficits for propaganda purposes that is malign.

  5. I set this out some time ago going back to 1975 – https://boffyblog.blogspot.co.uk/2015/03/liberal-tory-lies-deficit-and-labour.html.

    In reply to Shuan and Steve Hill, of course there had been a Tory government for 11 years prior to Major taking over from Thatcher in 1990. Thatcher’s government ran large deficits during all of that 11 years other than for two years, when it ran a surplus largely due to one off privatisation receipts as they sold off the family silver to foreign speculators. Labour by contrast after 1997 ran budget surpluses in four years, and its budget deficit between 1997 and 2007 was only half in percentage terms against GDP of that of the combined Thatcher and Major governments between 1979 – 1997.

    The Labour government of 1974-9 ran budget deficits larger than that of Thatcher only in two years, due to the global crisis of the mid 70’s. But after Thatcher took over in 1979, the deficit began to rise again, and wa only reduced in the 1980’s as a result of privatisation receipts, sale of council houses and so on. Yet, even with those receipts, Thatcher ran deficits twice the size of those of Blair and Brown between 1997-2007.

    Blair and Brown tamed the budget deficits again after 1997, until the global financial crisis broke out. They increased the deficit in order to save capitalism from the disaster that the Tories money lending friends and speculators had caused.

    And when the Tories got back in 2010 they returned to their usual fiscal irresponsibility and incompetence, sending the budget deficit and the debt soaring.

    They achieved the remarkable feat of both cratering the economy as a result of their measures of austerity that sucked out aggregate demand and undermined real investment, whilst encouraging yet more of the private debt and financial speculation that had caused the 2008 crisis in the first place!

    They thereby not only undermined wages, jobs and living standards, but by reflating the astronomical bubbles in stock, bond and property markets to bail out their speculator friends, they made it prohibitively expensive for ordinary people to afford pensions or houses.

    When it comes to fiscal and financial incompetence the Tories in government always take first place.

  6. So Steve. how long had the Tories been in charge before 90/91? Are you saying that the tories before Major were fiscally irresponsible to leave the Major gov with a large deficit and spending commitments?

    Really think you keep your powder dry on "academically unsound rubbish" tbh.

  7. Ludicrous cherry picking, academically unsound rubbish which takes no account of an incoming government’s obligation for its predecessor’s inherited deficit.

    If you dared to get this peer-reviewed, you’d be crucified for lying.

  8. Brilliant article. Congratulations.

    My only quibble is with the second para which refers to government borrowing for investment purposes. That just confuses two quite separate issues, I suggest. Reasons are thus.

    On the assumption that governments OUGHT TO fund investment via borrowing rather than via tax, then the decision as to how much to borrow in order to invest has very little to do with what size deficit government ought to run. To illustrate, even if no deficit is needed at all for stimulus purposes, it would still make sense to borrow £Xbn and spend that in infrastructure and similar investment if such investment is clearly viable.

    In the latter paragraph I implied it was not entirely clear whether investment should be funded via borrowing rather than via tax because in fact it is entirely unclear. Milton Friedman and Warren Mosler advocate ZERO government borrowing, and there are good reasons for that zero borrowing idea. And assuming that zero borrowing regime was implemented, deficits would be funded entirely by new base money.

    And just to muddy the issue still further, there is little effective difference between government debt and base money, as pointed out by Martin Wolf and Warren Mosler.

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