David Blanchflower: The Chancellor’s claims are as airbrushed as his election poster

It turns out that of the 760,000 additional businesses claimed by the Tories, 707,200 have no employees

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The Independent Online

The election campaign didn’t start out too well for the Tories last week with its poster telling voters: “Let’s stay on the road to a stronger economy.” It didn’t help matters that it was very quickly discovered that this was actually a picture of a road to Weimar, Germany, taken by the German photographer Alexander Burzuk, which had had the potholes airbrushed out and the horizon altered. This despite the fact that the Chancellor insisted in an interview with Sky News that “it is a British picture and a British road”! Credibility shot.

The Road to Weimar poster made three major claims on the economy that warrant closer examination. Just like the poster it appears there has been a lot of airbrushing of the facts and selective use of denominators.

1. “The deficit halved”.

This claim depends on using a denominator. The size of the deficit itself has shrunk from £153bn when the Coalition took office in May 2010 to £91bn today, so it is down by around 40 per cent, or nearer to a third than a half. The claim that the deficit has fallen by a half depends upon using as a denominator the level of GDP. GDP is up, so when the deficit is expressed as a proportion of GDP it has indeed halved from 10.2 per cent of GDP to 5 per cent. It should be said, though, that the reduction in the deficit is nowhere near what George Osborne claimed it would be in his Budget statement in June 2010. “What we have not inherited from our predecessor is a credible plan to reduce their record deficit … The formal mandate we set is that the structural current deficit should be in balance in the final year of the five-year forecast period, which is 2015-16 in this Budget.”

2. “1.75 million jobs created”.

This claim is false. Let’s look at the Office for National Statistics data published on its website. There are a couple of ways of doing it. First we actually have single-month data on employment for those aged 16-plus for May 2010 and for October 2014, which are 29,275,385 and 30,852,464 respectively. The difference between them is 1,535,189, or approximately a quarter of a million less than claimed by the Tories. A second way of counting is to take three-month averages, because the single-month data can be very volatile. So a second way of counting is to take the average of April, May and June 2010 (which includes jobs created by Labour in April and early May 2010) and compare it with the latest rolling average of August to October 2014, which are 29,194,035 and 30,796,815 respectively. The number of jobs created this way is 1,602,780. Rather than counting jobs created under the last Labour government, a third possibility is to take the average of May, June and July 2010, which still counts the early part of May when the Coalition weren’t in office. If you then do it a fourth way by comparing the average for June, July and August 2010, then you get 29,328,394. This way job creation is 1,468,421. So no way, no how, can you get 1.75 million jobs created. Pork pies, I am afraid.

The Tories continue to boast that the fact there are now nearly 31 million people in work means “there are more people in work” than ever before. This claim depends upon not using a denominator. It could also be said that there more people inactive than ever before. This is just because there are more people than ever before – 16-plus population is up 3.2 per cent since May 2010. The claim that “the NHS has more doctors and nurses and money than it has had in its history”, as made by the Prime Minister at PMQs, also depends on not using a denominator. The population is bigger – and older – than ever before. It has grown by nearly 2 million since 2010. The number of people age 65 and over, who make greater demands on the health service than young people, is up by around 800,000 since 2010. So spending more on a bigger population could be entirely consistent with spending less per person and of care worsening as demands on the service increase. That presumably helps to explain the evolving A&E crisis in the NHS. Not enough extra doctors, nurses or money as the denominator went up.

The first chart plots the three-month rolling employment to population rate for those age 16-plus, which at 59.5 in October 2014 is well below its pre-recession average. It is true that the 16-64 rate is approximately back at its starting level. But that doesn’t seem relevant given that the claim for the rise in employment above relates to 16-plus employment growth; if it was changed to changes in the employment of prime age workers aged 16-64, then employment growth from May 2010 to October 2014 is only one and a quarter million.



3. “760,000 more businesses”.

This claim uses data from Department for Business, Innovation and Skills’ (BIS) statistical release on business populations, which includes unregistered businesses which don’t pay VAT or PAYE and have no employees – in other words, self-employed people working alone, some in partnerships. The BIS reported there were 5,243,100 private-sector businesses in 2014, and there were 4,483,000 in 2010 – the year the Tories used as their baseline, leaving a difference of 760,100. Careful work by Channel 4 Factcheck has helpfully noted that if you simply count (as the ONS does) the number of registered new firms who pay VAT and/or PAYE, there were 2,263,645 business entities in March 2014, while in March 2010 there were 2,100,370 businesses. So the number of registered new firms is 163,275, or around a fifth of the Tory’s claim.

It turns out that of the 760,000 additional businesses claimed by the Tories, 707,200 have no employees at all. Teddy bear stuffers and taxi drivers are hardly “businesses”. The chart documents the latest quarterly data from Eurostat on changes in the number of self-employed workers who have employees since Q2 2010. This contrasts with the growth in the number of self-employed workers without employees. In the second quarter of 2010 when the Coalition came into office there were 758,800 self-employed workers who had employees. By Q3 2014 that number had risen to 763,200, so the number of successful businesses created by the Coalition was 4,400. Or approximately a 1/172nd of what was claimed.

Let’s stay on the road to Weimar: 1.75 million jobs not created; 760,000 businesses not created; and the deficit not halved. Brilliant.