In the early 1980s all the figures you needed to understand public finances were published annually in the Red Book. Tyically around 40 pages long, it had a plain red cover. If you read it you knew the state of the national accounts.
Labour’s last Red Book, published in March 2010, was 227 pages long. Whilst the titles on the cover were still in red, it was glossy with photos of police, underground trains, windmills, a woman in safety goggles and a couple of women at the greengrocers. There were more figures and tables than in the older versions, but the shifting series, differing baselines and questionable forecasts meant it was more difficult to understand what was going on with the public finances. The differences sum up the age of spin.
I was pleased to read today that David Cameron is now warning the country about the likelihood that the new Office of Budget Responsibility will come up with lower and more realistic forecasts of growth for 2011 and 2012. Readers of this site will remember I set out the possible impact this will have on the deficit a few days ago. If you read the Labour 2010 Red Book carefully you can see officials already had their deep doubts about the Chancellor’s forecasts.
In one of the most interesting full page essays officials got away with publishing “Uncertainties around current forecasts”. In this they pointed out that the Labour government had forecast 0.75% more growth for the year ahead on average during the period 1998-2009. They stressed that these errors mainly reflected poor forecasting in the last three years. They also pointed out that most independent forecasters and the Bank of England were forecasting lower growth, or forecasting more risk of lower growth than the government.
That same 2010 Red Book revealed that public sector net worth has crashed from 70.9% of GDP at the end of the Thatcher period to 22.4% in 2008-9. Despite the massive spending, net worth has fallen as a result of public sector wealth destruction and heavy borrowing. It also shows that the government spent £118.6 billion on interventions with the banking sector with no path identified to get all that back. Any potential “profit” on share sales has to take into account this large sum of total support, and the risky assets we are all still underwriting.