PM says 2010 Britain was as badly off as struggling nation – implying the Tories have saved the UK – but context puts paid to this claim

This article is more than 5 years old

This article is more than 5 years old

David Cameron has claimed that in 2010 Britain’s deficit was expected to be worse than Greece’s, implying that the two countries were on a similar economic course.

Here is what the prime minister told Sky News on Tuesday:

When I became prime minister in 2010, Britain was on the brink. We had a budget deficit forecast to be bigger than Greece’s, and we needed to take responsibility.

The Conservative party chairman, Grant Shapps, went even further on Newsnight on Monday night, claiming the UK was “as bust as Greece”.

Is that true?

Technically speaking it is true that Britain and Greece had a similar deficit (roughly 11% of GDP) five years ago. However, that is where the similarities end. Britain was never on the verge of going bust.

First, once Greece’s deficit was revised based on more solid statistical procedures it ended up at 15.7% of GDP.

Second, the UK entered the financial crisis with relatively low public debt (less than 70% of GDP – that’s pretty much in line with Germany at the time).

Greek public debt was above 120%, the highest in the EU, and its economy contracted by more than 5% in 2010 and by nearly 10% the year after – more than any other country in Europe.

(Reminder: debt is the amount of money a country owes – the total borrowed – while you have a deficit when government spending exceeds revenue. ie If the deficit is going up, it means a country’s net borrowing is also increasing to make up for a growing shortfall.)

Third, Britain had, and still has, far stronger and more stable institutions than Greece. In 2010, the estimated tax evasion costs for the Greek government amounted to well over $20bn (£13.5bn) per year. That means it can’t pay its bills.

Fourth, and most importantly, Greece did go bust and had to request a bailout that now totals about €240bn (£175bn). Since the initial bailout programme, two rounds of relief have also been applied to Greece’s debt burden, which extended the maturity of the country’s debt to an average 16.5 years, double that of Germany and Italy.

In 2010, in most European countries the average maturity of debt was between five and nine years. In Greece, for example, it was almost eight years. In the UK, the average maturity of the gilt market was then 14 years, longer than almost anywhere else in the world. So the UK had far longer to pay off its debt.

A floating exchange rate, which the UK has and Greece does not, means Britain can control the value of the pound whereas Greece is stuck with the euro. The Bank of England’s £375bn quantitative easing programme did the rest.

Conclusion

By a very narrow measure, with no context, Cameron can make that claim but it is just not comparing like with like and does not stand up to scrutiny.

Sir Nicholas Macpherson, the permanent secretary to the Treasury, has said as much.



The UK is not Greece. It has much stronger institutions and – most important of all – a floating exchange rate.

Update: this article has been updated to more clearly define deficit as the difference between government expenditure and income.