Taxpayers Alliance fact check
Let's play 'fact check the Taxpayers' Alliance'.
They have shocking new "research" out which claims that 'the borrowing plans announced in yesterday's Pre-Budget Report will run up double the debt that Britain incurred winning the First World War.'
Happily, if unwisely, they included their sources and methodology for this. They read one book and looked at one website, which is actually far more extensive research than some of their past efforts. Unfortunately, they either didn't understand the website, or deliberately and dishonestly misrepresented the information it provided.
Their methodology was to adjust for inflation the amount that the government borrowed during the First World War, and compare it to the amount that the government will be borrowing over the next few years. They came up with the figure of £255bn for borrowing during world war one, compared to £512bn for the current crisis.
But the problem is that the website that they used to calculate this figure specifically explains that they've used the wrong comparison. The Measuring Worth website lets you enter an amount from any given year, and then calculate different measures of how much that amount would be worth now. The results vary considerably depending on different measures, particularly over 90 year periods, so it is absolutely crucial to use the correct measure for what you are trying to find out. Happily, they have a guide to explain which measure to use:
"If the amount you are asking about is the construction of a church, the cost of a war, or a new highway, again the context is important. If the question is how much it cost compared to the present cost of materials or labor, you would use the GDP deflator and/or the wage or earning index. However, you may be more interested in how important this project was to the community or the country. In the past there were less amounts of materials and labor available for all projects. So to measure the importance of this project (compares to other projects) use the share of GDP indicator."
To get the figure of £255bn, the Taxpayers' Alliance used the retail price index measure. As an economically valid comparison, this is about as useful as if they'd used a Random Number Generator or just made the number up themselves. It's clear from the explanation above that the most useful comparison is about 'how important this project was to the community or the country', and hence the indicator to use is the share of GDP indicator.
And if you use the measure of GDP indicator, you find that the relative cost of the First World War, in today's money, is £1,939bn, or nearly four times the cost of borrowing planned by the government now. (For what it's worth, if you instead use the GDP deflator or wage or earning index, you get numbers ranging from £311bn to £1,480bn).
It tells you everything that you need to know about the Taxpayers' Alliance that given the choice between cherry picking data and making a dishonest comparison which suited their argument or making an honest comparison based on the facts, they chose the former. Alternatively, if it were a genuine error, it shows that they don't understand the difference between different measures of inflation and other basic economic concepts. Thank goodness for the other Taxpayers' Alliance.