Anthony Hilton: Structural deficit is a red herring

PR is often at its most effective in situations where people do not actually realise PR skills are being applied.

Anthony Hilton
Anthony Hilton

In the first half of its 13 years in office, the Labour Government got away with a lot, because while people talked about spin it was generally too subtle for them to notice, or to realise how deeply embedded it was in everything the leadership did. Later on, perhaps turned by the decision to go to war in Iraq, the public, led by the media, went to the other extreme. By then it was assumed that everything was manipulation.

The contrast with the Government now is marked. When people in the City comment on the coalition Government, they very often say that even when they don't necessarily agree with the proposals, they find it refreshing to have the policies presented without the spin. What they fail to realise is that in that sense, if in no other, we are back in the early days of New Labour.

The entire economic debate is a mass of spin and nowhere more than in the way George Osborne has made the reduction in the structural deficit the core aim of government policy. In his Budget speech he said: 'Because the structural deficit is worse than we were told, my Budget today implies further reductions in departmental spending of £17bn by 2014-15.'

The structural deficit is an artificial concept. Its size depends on the assumptions that underpin it, the central one being the assumption about how much productive capacity in the economy will be permanently destroyed by recession. This is guesswork - guess high and the prediction goes up; guess low and it comes down.

Note that the structural deficit bears no relation to the actual deficit. In fact the coalition inherited an economic situation that was better than predicted in Alistair Darling's last Budget - the actual deficit was lower and growth has been higher. But by focusing on the 'structural' deficit, the Government can ignore this good news and paint the picture as darkly as it wants.

Why? Because its main desire is to cut government spending. The more alarming the structural deficit can be made to appear, the easier it is to justify the cuts.

- Anthony Hilton is City commentator on London's Evening Standard

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