Facts
During a BBC Radio 4 interview with Evan Davis, Laura Trott claimed that debt is “falling as a percentage of GDP” over “the five-year fiscal forecast.”
There are multiple measures of debt, but the government’s debt targets focus on “public sector net debt excluding the Bank of England” (PSND ex BoE), often described as underlying debt.
Underlying debt rose from £2,129 billion in September 2022 to £2,373 billion in September 2023.
An Office for Budget Responsibility (OBR) report published at the end of November 2023 forecasts underlying debt will rise to £3,039 billion by 2028-2029. At no point does underlying debt fall.
Underlying debt is also often quantified as a percentage of GDP. The OBR forecasts underlying debt to rise “from 89% of GDP in 2023-24 to 93.2% in 2026-27. It then declines in the final two years to 92.8% of GDP by 2028-29”. Because the OBR forecast shows no reduction in underlying debt as a cash value, the fall from 93.2% to 92.8% is the result of a rising GDP, not a reduction in debt.
Verdict
Laura Trott cannot be accused of lying. Though Chief Secretary to the Treasury, it seems that she simply had no idea what she was talking about.
Debt as a percentage of GDP is forecast to fall by 0.4 percentage points over two years, but only after an increase of 4.2 percentage points. Therefore it would be more accurate to say debt is forecast to rise by 3.8 percentage points, it is not falling, nor forecast to fall.
We emailed Laura Trott’s parliamentary office and HM Treasury offering them the chance to respond. The email was received, but no reply.
Not Client Journalism
Three cheers for presenter Evan Davis, who exposed Trott’s ignorance.
Davis did so with courtesy and lightly worn learning: a model for others. Below we have added a transcript of the relevant section of the interview.
Evan Davis: What is puzzling me is how you can be even talking about tax cuts, when a central pledge is getting debt down, and debt is going up.
Laura Trott: The central pledge is one of our fiscal rules, which is that debt needs to be falling over the 5 year fiscal forecast as a percentage of GDP, which it is.
ED: No, it’s higher in 5 years than now.
LT: Not as a percentage of GDP.
ED: It’s going up. It’s lower in the 5th year relative to the fourth year, so it goes down at the end of the projection, but in five years [… inaudible] 89% of GDP, 2029 its 93% of GDP. Debt goes up. It falls at the end of five years a little bit, but that doesn’t mean debt is coming down, it means debt is going up, it’s higher. It’s higher in five years than now.
LT: It’s falling as a percentage of GDP.
ED: No, it’s higher as a percentage of GDP.
LT: I’m not sure.
ED: This is really basic. I’m looking at the latest OBR table, Public Sector Net Debt ex. Bank of England, 2029, 92.8%, 2024, 89%. It’s up in five years. I’m amazed you don’t know that debt is rising…
LT: I need to have the figures. I’ve got different figures which ….
ED: Let’s just suppose, if this is higher on the OBR forecast in five years than now, you couldn’t possibly be cutting taxes, while your pledge is that debt should be falling.
LT: The point is that we have our fiscal rules, and within those we have an amount of headroom. We will only do things that are fiscally responsible, and sit within our fiscal rules.
ED: Really big point this. And one of us has obviously got it wrong. I think I’m looking at the right table, and I think I’m looking at the right line, and it’s possible that the figures will all change, but at the moment it looks to me like debt is higher in five years than it is now, and you’re still talking about tax cuts. I’m just wondering how you do that if one of your key five pledges is debt falling.
LT: As a percentage of GDP over a five year forecast.
ED: I’m looking at percentage of GDP, that’s the only relevant one.
LT: We’ve always said that we will only do things within our fiscal rules, and where it is affordable for us to do so.