How Britain is using spin to con the bond markets

Austerity, austerity, austerity. The A-word is cropping up everywhere at the moment, whether in France or Greece or Germany. And the UK isn’t immune from it either. If there is anything on which Britain’s political factions agree, it is the reality of fiscal austerity. Whether it’s Ed Balls banging on about ‘too far and too fast’, or the coalition saying that their programme of painful austerity is essential if the UK is to defend its triple-A ‘safe haven’ status, this is something on which our political class has reached consensus.
 
But, as we at Tullett Prebon argued in a briefing paper yesterday (available here as a pdf), the tale of ‘big’ cuts in public spending is a bare-faced deception. Just look at the official Treasury numbers. They show that real public spending was just £8 billion (1.1 per cent) lower in 2011-12 than in 2009-10. This number, modest in itself, needs to be set against the big (£31 billion, or 4.6