How parties plan to tackle deficit
Labour has put deficit elimination and fiscal responsibility on the front page of its manifesto in a bid to head off Tory poll leads on the economy - but what is the deficit, how big is it and what do the big parties plan to do about it?
:: WHAT IS THE DEFICIT?
At a basic level, the deficit is the difference between what the Government spends - delivering policies, employing staff, building infrastructure and so on - and what it gets back in taxes and other revenue. Broken down further, the Government runs a current account for day to day spending in departments and commits to longer term capital spending for big projects.
:: IS IT THE SAME AS DEBT?
No. To finance running a deficit, government has to borrow money to fill the gap between spending and income. While a proportion of public spending goes on financing this borrowing, the total stock of debt is increasing every year.
In the current financial year, £35 billion is being spent on debt interest - more than on public order and safety, at £34 billion, more than on housing and environment, at £28 billion, and more than on transport, at £29 billion.
According to the Office for National Statistics, at the end of February 2015, public sector net debt, excluding public sector banks, was £1,468.5 billion or 79.6% of GDP.
:: HOW BIG IS THE DEFICIT TODAY AND HOW MUCH HAS IT REDUCED UNDER THE COALITION?
At Budget 2015 in March, Chancellor George Osborne reported to MPs the annual deficit in 2014/15 was forecast to stand at £90.2 billion. In the previous year, 2013/14 it stood at £97.3 billion, according to the Budget red book.
Documents from the Office for Budget Responsibility, set up by the coalition to provide independent economic forecasts, state borrowing peaked in 2009/10 at £153 billion.
The March 2015 update from the OBR said in 2014/15, the deficit was down by 41% in cash terms and by 51% as a share of GDP.
:: WHAT DO THE TORIES, LABOUR, LIB DEMS AND UKIP WANT TO DO ABOUT IT?
The Tories want to press on with their current plan, insisting the overall deficit can be eliminated with another two years of cuts and restrictions on public spending. The stated goal is to run a surplus in the second half of the next Parliament and ensure total debt is falling.
Labour also says it wants to clear the deficit but talks specifically about current day to day spending and also about doing it over the whole five years of the new Parliament. The first page of its manifesto, published today, pledges a new Labour government to a "budget responsibility lock" that demands a reduced deficit every year to ensure a surplus "as soon as possible".
The Liberal Democrats also want to eliminate the deficit in two years but want to raise more money in taxes rather than take the Tory approach of tackling the problem via spending cuts. Nick Clegg said yesterday his plan would mean £70 billion less borrowing than Labour's approach.
Ukip is also in favour of deficit reduction. At the party's spring conference, Nigel Farage pledged to hold any governing party's "feet to the fire" over the issue.
:: WHAT ABOUT EVERYONE ELSE?
The Green Party opposes austerity, insisting the economy needs fundamentally remodelling to ensure it is fairer for everybody. Leader Natalie Bennett yesterday told the BBC Andrew Marr show there had been "undue focus" on the deficit as she unveiled plans for a new 60p top rate.
The Scottish National Party also opposes austerity. Nicola Sturgeon wants fiscal autonomy for Scotland and says growing out of the deficit is better than cutting spending. She has said her plans are "reasonable and modest" but admitted "under my plans it would take a few years longer to completely eliminate the deficit".
Plaid Cyrmu leader Leanne Wood has described deficit reduction as a "con", promoting an end to austerity and higher public spending. The Welsh nationalists would plan for a £30 billion deficit by 2020 insisting this is "totally affordable by historic levels".
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