FACT CHECK Why the Liberal Democrats’ sums don’t add up
The Liberal Democrats have claimed that an average or typical household became £1,200 poorer in Rishi Sunak’s first 100 days as Prime Minister.
The most basic problem with this estimate is that it doesn’t consider everything that affects how much richer or poorer a household might become.
This could include mortgage costs, income tax and grocery prices, which the Liberal Democrats considerd. But it could also include many other costs, such as fuel or other taxes—as well as things that might have increased a household’s income, such as changes in wages or benefits, which they did not.
But even for the things the party did consider, the rises in costs won’t apply to the average household.
The biggest cost in the party’s analysis was increased mortgage costs for people refixing, but this would have affected less than a million households since Mr Sunak became Prime Minister.
And the Lib Dems estimated the cost of increased taxes based on a household with earnings of almost £100,000, far higher than the UK average.
Although it is true that many households have faced rising costs in the last 100 days, this figure is based on calculations that contain several significant flaws.
The true figure is hard to estimate and varies according to the assumptions you make, but one recent estimate for the fall in living standards by the Office for Budget Responsibility suggests that the true figure for these 100 days is probably lower.
Stephen Flynn MP, the Westminster leader of the Scottish National Party, claimed that former Prime Minister Liz Truss’s government cost the UK economy £30 billion at Prime Minister's Questions on 8 February 2023.
The SNP told us this was actually an estimate of the cost to the public purse of Ms Truss’s premiership, but this is not the same thing as the cost to the economy overall which is significantly more difficult to estimate.
For example, the Resolution Foundation think tank estimated the cost at £20 billion of reduced government income from tax reductions which survived from the September mini-Budget and an estimated £10 billion for permanent increased borrowing costs.
This figure may no longer be relevant as an estimate of the cost to the public purse. The Resolution Foundation has since said the “mini-budget premium” on borrowing costs has now “unwound”.
It’s incorrect to suggest that reducing taxes directly reduces the size of the economy, just as it would be incorrect to suggest increasing taxes directly increases the cost to the economy.
In a tweet following the publication of new gross domestic product (GDP) figures by the Office for National Statistics (ONS), the Conservative Party claimed: “The UK economy recorded the fastest growth in the G7” in 2022. This claim was also made by chancellor Jeremy Hunt on Twitter.
It’s true that between 2021 and 2022 annual GDP grew by 4%—the fastest rate in the G7.
But as others have pointed out, when making this comparison it’s worth bearing in mind that in 2021 the economy was still impacted by the Covid-19 pandemic so comparisons with this period are not necessarily the most useful way of assessing recent economic growth.
Over the last quarter, the UK economy didn’t grow at all, performing worse than the USA, Canada and France, but better than Germany and Italy (data for Japan isn’t yet available).
Over a longer period, the UK is the only G7 country in which the economy remains smaller than it was before the pandemic.
