Tuesday, 22 January 2013

Debating debt ratios with Michael Fabricant

Last night I got into a Twitter "debate" with Michael Fabricant, who is Vice Chairman of the Conservative Party.   I replay it here to set out the facts (which are fairly simple) and perhaps to give Mr Fabricant one more change to correct his position gracefully.  

[Updated, 2.45pm: Mr Fabricant has done exactly that, tweeting: 
"Lesson learned. NEVER take a 'fact' from a colleague at face value. I withdraw the remark on Debt to GDP ratio. Apologies to all."
This is both gracious and appropriate in content and tone, and I am grateful to Mr Fabricant. So what follows is now simply for the record; if you just want the facts on debt/GDP, no need to read past the chart.]

It started when Mr Fabricant tweeted the following:
"GDP to debt ratio almost as big now as WW2. Total war achieved the same debt ratio as total incompetence achieved in 2000's by Gordon."
II responded, I thought factually, politely, and self-explanatorily, as follows: 
"I hope  will retract that last tweet; simply wrong, as chart shows."
and provided this chart, showing the debt to GDP ratio from 1900 to 2011:

[Note: the source for this graph is the excellent ukpublicspending.co.uk, which is reliable and uses Treasury and other official figures where possible; this chart and variants of it (they have one which goes back to 1692) is frequently reproduced.  There is no question mark over this data as far as I know, and certainly not over the broad picture]

The chart shows the debt-GDP ratio (not the GDP to debt ratio, which of course goes up when debt goes down, so presumably was not what Mr Fabricant meant).  UK debt rose from well over 100 percent of GDP before World War 2 to over 230 percent of GDP immediately after. This compares to a current level of about 75 percent.   Note that even if you use gross debt - which neither the government or economists usually do, since net debt is fairly obviously the more useful concept  - the current level is only slightly over 90 percent (international organisations sometimes use gross debt because it is easier to get comparable data across countries).   

You can also read Martin Wolf on the topic of debt and deficits in the 1930s here; as Martin says, the result of "fiscal famine and monetary necrophilia" was that:
"By 1930, debt had reached 170 per cent of GDP. By 1933, it had reached 190 per cent of GDP. (These numbers put the panic over today’s far lower ratios in perspective.) In fact, the UK did not return to its pre-first world war debt ratios until 1990."
So the facts are absolutely clear.  Mr Fabricant was simply wrong - and not by a small margin, either. You'd have thought that would be it.  But no. The next thing Mr Fabricant tweeted was this:
"This chart chart does not relate to what I tweeted. Either you deliberately set out to mislead or did not read what I wrote."
I responded by retweeting this tweet, so people could see that Mr Fabricant was responding with abuse and further error, rather than a correction. I then tweeted, again I thought clearly and politely:
"You said debt to GDP ratio. That's what the chart shows."
[I didn't see the point of also correcting his odd reference to the "GDP to debt" ratio].

Mr Fabricant's next tweet further compounded things, by showing that he didn't understand either the chart, the figures, or even the concept of a ratio: 
"Remarkable how people choose to confuse public net debt with the GDP to Debt ratio. My last tweet is correct. Only the ignorant are howling."
Of course, what the chart shows (and it is clearly labelled as such) is indeed the ratio of public sector net debt to GDP; the standard debt-GDP ratio generally referred to by the government, and indeed the one covered by the government's (now abandoned) "debt target".  

Mr Fabricant then compounded this by tweeting (truly bizarrely) the following: 

"This man  says "That chart does not relate to what I tweeted." Then claims the chart shows I am wrong! What pervt'd logic is that?"
Of course that quote is his, not mine. [Note: I thought originally Mr Fabricant had deleted his original tweet, but apparently I got this wrong: I misunderstood precisely how the twitter settings work, and it is still visible to some. My mistake.]  

What can we conclude from this episode?   

First, that Twitter brings out the worst in some people. I will try to avoid the temptation to be too self-righteous on my own behalf, but it is pretty poor form for Mr Fabricant to describe the numerous other twitter users who made the same point as me as "ignorant" and "howling", given that is their taxes that pay his salary and fund his public displays of genuine ignorance.  If Mr Fabricant has any intellectual self-respect at all, he will correct his original assertion, and apologise to the people he's insulted. 

Second, that as Fraser Nelson and Patrick O'Flynn have repeatedly pointed out from a somewhat different angle, politicians frequently confuse debt and deficits.  And third, that the economic history of the UK, and in particular the fact that by historical standards UK public debt remains relatively low, should be better known. Let's hope this episode addresses to a very modest extent the last of these.  

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