Among yesterday’s front pages was a data visualisation which, at first glance, was one of the most effective I’ve ever seen: the Independent had made an infographic showing yesterday’s £6bn budget cuts in context - as a fraction of a debt mountain.
Then I looked closer - and something’s very, very wrong.
Can you tell what it […]
Among yesterday’s front pages was a data visualisation which, at first glance, was one of the most effective I’ve ever seen: the Independent had made an infographic showing yesterday’s £6bn budget cuts in context - as a fraction of a debt mountain.
Then I looked closer - and something’s very, very wrong.
Can you tell what it is yet?
Maybe not. What the Independent have done is confuse the UK’s deficit with our debt. Sounds like splitting hairs, but it’s not.
Let’s demonstrate using my personal finances, which are in almost as parlous a state as those of our great nation.
As a recent graduate, I have around £20,000 debt, repayments for which whoosh out of my bank account on direct debit. Thanks to overspending on beer, office snacks and (ahem) gym memberships, I spend around £50-a-month more than I earn, after I’ve paid all my bills.
To get back on an even keel, I don’t need to pay off my £20,000 debt: all I need to do is get a £600-a-year pay raise (which works out at £50-a-month), or spend £50 less.
So cancelling my gym membership, saving myself £20 each month, leaves me with just £30-a-month to find. It means I’ve tackled about half of my monthly shortfall.
It doesn’t mean I’ve saved £20, and have £19,980 to go. In fact, I haven’t paid back any of my debt. The regular repayments from my bank account will (eventually) sort that out. I just need to stop going further into debt each month.
The government is in exactly the same position. Provided debt isn’t ridiculous, and we’re making our repayments, we’re fine. The UK’s debt is just shy of £900bn. The cuts announced on Monday do nothing to address it.
The UK’s deficit (the gap between the government’s income and spending) is around £157bn. Most economists think around £48bn of this is temporary, due solely to the recession. That means around £109bn of cuts need to be found. So, in fairness to the Indie, the £6bn still remains a small fraction of the whole. There’s much worse to come.
In other words, a national broadsheet newspaper made the debt problem look around eight times worse than it is, doubtless worrying (or at the very least) confusing its readers. And it used the whole of its front page to do so.
It’ll be interesting to see how they deal with it. An error of such magnitude against a corporation would doubtless result in lawsuits. That obviously won’t happen in this case, but the Indie does owe its readers an apology, and a prominent correction.
I’m a sucker for a nice infographic (okay, a nice bit of chartporn). But data is important. As more and more is released and done with it, it’s crucial journalists learn to treat it properly - and that’ll only come when it’s treated with the same respect (and fear) that surrounds misspelling someone’s name.
That’s still a long, long way off.
Tags: bad stats, debt, deficit, featured, Independent, journalism
May 26th, 2010 at 10:33 am
Nicely Put. Now please explain fractional reserve banking so the masses can understand it…
May 26th, 2010 at 6:26 pm
Indeed, I left this comment on ‘infographic news’
http://infographicsnews.blogspot.com/
” Matthew said…
Well nice graphic, but misleading information. You can’t consider “Britain’s” debt without considering Britain’s assets, most of this debt is held internally, so it should be the ‘government’s debt’, and also the cuts yesterday reduced the accumulation of debt but not the debt itself.”
I suppose they could make the case if that was projected debt, end of 2010, that it would be £6bn lower. But it’s not, it’s end-April debt
May 26th, 2010 at 7:18 pm
I’m not sure I agree. Ignoring the debt and focusing on the deficit is just avoiding the underlying problem. Yes you need to get the deficit under control first, so you can stop adding to the mountain, but ultimately the debt is just as big an issue.
It’s like having a huge credit card balance but saying all is well because I’m currently breaking even paying off the £500 / month interest bill.
At current it is reported that £1 in every £10 that us taxpayers give to the government is used to service the huge mountain of debt (as depicted by the Indy). What a waste of money!
I think the Indy has every right to show the £6bn worth of savings against the total money owed, and not against the amount needed to stop adding to the mountain. Yes it’s a little bit sensationalist, but it isn’t wrong.
May 26th, 2010 at 8:34 pm
James - to an extent I agree with you (and the Independent) in that the UK’s debt level is certainly not something to be complacent about.
That doesn’t stop this chart being entirely wrong.
The debt and deficit are virtually unrelated. The cuts announced on Monday don’t reduce the debt pile by a penny (they reduce the need to borrow and therefore add to it).
Upping debt repayments cuts the debt. Spending less reduces the deficit.
It’s not splitting hairs to make this point: the UK could (in theory) rid itself of its debt mountain by means of the mother-of-all asset sales.
But if it didn’t tackle its deficit, the debt mountain would quickly reappear, as we’d spend more than we earn.
The immediate concern is tackling the deficit, thereby stopping ourselves going further into debt each year. The situation with debt is more nuances.
The Independent’s error was factual, not one of tone or priority.
That said, I hope it doesn’t discourage them from trying similar covers. It was nearly brilliant. I just hope they get future ones right.
May 27th, 2010 at 8:06 am
I do think also the issue of assets v liabilities is an important one. Most UK government debt is held internally, ie by UK citizens, and so it’s not true to call it the ‘country’s debt’. For example if the UK government borrows £10bn by issuing Gilts bought by UK households then the country’s net debt position is unchanged. On the other hand there are other private debts, some of which are owed to foreigners, and so on, and of course the distribution of public debt ownsership within the country does have implications for future government policy, political groupings and so on, especially on how favourable people are to higher inflation.
May 27th, 2010 at 7:31 pm
Fair points. Maybe some sort of chart of projected levels of debt, with or without these £6bn reductions would have been appropriate. Not ignoring the debt mountain, but recognising the immediate concern is to stop adding to it.