Labour's argument on the cause of the deficit

John Denham MP was on Question Time yesterday - you can watch the program here.

In the program he appeared to explain that the deficit was incurred as a result of the banking crisis - but if that is what he was implying, then that is essentially dishonest. 

The reason that I say that this is dishonest is because the deficit is a result of Government expenditure exceeding Government receipts - and some of this is the result of the loss of receipts from Banking and a result of reducing receipts as a result of the recession in general - but the problem that the Government has to deal with is not the whole of the deficit, but the structural deficit. 

The structural deficit is estimated at be between £60 billion and £100 billion a year - that is less than the deficit which is almost 2 times that.  The problem with the structural deficit is that it is the sum that the Government would be spending in excess of receipts even if the economy was going well ... and that amount is extraordinary. 

Interestingly, Caroline Lucas MP was also on Question Time decrying the actions being taken - but isn't this the same Caroline Lucas who was telling us until very recently that we should consume less and whose supporters were claiming that a recession would be 'good for us' as it would reduce our impact on the world!

A real difficulty with these arguments is that it will always end up being a 'what if' argument.   There are real risks associated with the action being taken to reduce the structural deficit - but there are also real risks associated with doing nothing.

It is clear that people are confused about the difference between the national debt and the deficit.  This is clear from a number of the questions asked on the program. 

Polly Toynbee does what she always does and sets up straw men to put down.  The Conservatives do not believe that a reduction in the number of people employed by the state magically increases employment in the private sector - that is an extremely false caricature (and I know that is tautologous).