Does the increase in public debt mean that ‘Tory austerity’ failed?

I’m seeing lots of variations on ‘how can the Tories criticise Labour’s borrowing plans when debt has risen by £800 billion under their watch?’. But while there may indeed be good reasons to criticise the Conservatives’ track record on fiscal policy, the increase in public debt is not one of them.

It might help to start by spelling out the difference between ‘borrowing’ and ‘debt’. In the words of the OBR, ‘when total spending in a year is higher than total receipts, the Government needs to borrow to cover the difference. This gap is known as the budget deficit or ‘public sector net borrowing’. When receipts are higher than spending, the government runs a surplus‘.

Borrowing, or the deficit, is therefore a ‘flow’. Debt, in contrast, is a ‘stock’. Picking up from the OBR again, ‘because governments run deficits much more often than they run surpluses, they have built up a significant stock of outstanding debt over time. Generally speaking, if the public sector runs a deficit in a particular year, debt will rise in cash terms.’

With that distinction in mind, it’s true that public sector net debt has increased by roughly £800 billion since 2009-10, as this ONS chart shows. (You can find the full data here.)


However, this is the inevitable result of running annual budget deficits. As the next chart shows, public sector net borrowing was a massive £158 billion in 2009-10 and this has been gradually reduced under the Tories. That was the main objective of ‘Tory austerity’ – to bring borrowing under control. But if you run an annual deficit of any size, the accumulated stock of debt will increase.


It is also worth stressing that the UK is not the outlier here that some seem to think, or that the ‘austerity failed’ narrative might imply. The underlying fiscal maths is the same anywhere.

Looking at the rest of the G7, there have been bigger increases in government debt (as as share of GDP) in the US, France, Italy and Japan, since 2010, than in the UK. The only G7 economies where debt hasn’t significantly increased are Germany, where most now agree that fiscal policy has been far too tight, and Canada, where the 2008-09 recession was relatively shallow.

g7 debt

The only way that any UK government (Labour or Tory) could have stopped debt from rising significantly over this period would therefore have been to reduce the annual deficit much more quickly. This could perhaps have been achieved by tightening fiscal policy more aggressively – in other words, by even more austerity – but presumably few think that would have been sensible. 

Alternatively, a combination of fiscal and monetary stimulus might have resulted in a stronger economic recovery, and this could have turned the public finances around more quickly too. But realistically, a more expansionary policy would still have required the government to run large annual deficits – perhaps even larger in the early years – and hence added to the stock of debt. 

To be clear, there’s a healthy debate to be had about whether the fiscal tightening in the early 2010s went too far, especially when the economy was still weak, interest rates were already low, and many other countries were cutting back too (though hindsight is usually doing an awful lot of work here). It is also reasonable to ask whether the burden was fairly shared between rich and poor. (See this schools presentation.) But it makes no sense to claim that the large increase in UK government debt since 2010 means that austerity failed – or that it shows the Tories can’t be trusted on the public finances.

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