Are fiscal conservatives even certain of what they're arguing about?

One of the problems fiscal conservatives have is that most of them can't actually agree about what they are conservative about.

One of the problems fiscal conservatives have is that most of them can't actually agree about what they are conservative about. Debt? Deficit? Absolute, or relative? And how should we talk about the issue?

For instance, one would guess from their name that deficit hawks care about the deficit – that is, the amount that a country spends each year in excess of the amount of revenue it receives, officially called (in Britain, at least) public sector net borrowing (PSNB). Last year, PSNB stood at a shade over £120bn, and this year, it's forecast to be £91.9bn. That's the government's deficit reduction strategy at work, albeit at far slower work than we were promised in 2010.

But other fiscal conservatives go after debt (the official measure of which, Public Sector Net Debt, stands at £1.03trn). Fraser Nelson, for instance, condems the elision between the two in today's Telegraph:

Cameron faces the same problem. He says he is “dealing with the debt” when he is actually increasing the national debt by as much as Labour proposed: an almighty £600 billion. But he has not yet been rumbled. An unpublished YouGov poll by Policy Exchange, taken after last year’s Budget, found that just 14 per cent of voters realised the national debt is rising. Another poll, released this week, found that only 10 per cent see what’s going on. Now, just as under Labour, ministers play word games and talk about “cutting the deficit”, knowing that most voters will hear “cutting the debt”. Astonishingly, almost half of British voters think that debt is falling.

It's certainly the case that debt is rising, and will be rising for some time. And confusing debt and deficit – as, say, Nick Clegg does – is unacceptably economically illiterate. But it's unclear how, exactly, being a "debt hawk" would work.

It is emphatically not the case that Britain can begin reducing its debt any time soon. For all that Nelson attacks the government for increasing the national debt, to reduce it would entail turning a deficit into a surplus overnight. Just considering the pain involved in entering into a seven-year deficit reduction program, doing it any faster would be politically impossible.

And in fact, given the various multipliers in effect from government spending, it may be economically impossible as well. There is strong evidence to suggest that the mere fact of trying to cut the deficit too quickly led to the contraction we're now experiencing; and that contraction has reduced government revenue and increased mandatory spending to a degree that makes it difficult to do any deficit reduction at all.

Being a debt hawk would thus seem to necessarily imply being a deficit hawk, at least for the time being. When – if – the structural deficit is eliminated, then the two groups can argue over whether debt should start being reduced; but while there is a deficit, it's silly to pretend that national debt going up is somehow surprising, and unless you want to go full Paul Ryan, you aren't going to get rid of it in a year.

All of this confusion is compounded by the fact that if it's unclear what we ought to be trying to reduce, it's doubly unclear how we ought to go about measuring it. Debt hawks favour quoting absolute figures, like those I've used at the top of the post, because frankly one trillion pounds sounds a lot more than "65.7 per cent of GDP". Yet the latter is probably a more accurate representation of where we are; for one thing, it allows us to accurately compare the economic situation with similar ones from history, as this chart (from Wikimedia Commons) does:

And for another, it conveys an important truth about the debt, which is that we can shrink it in two ways: either by paying it off, or by growing our economy big enough that what's remaining doesn't matter. This is the truth behind arguments over "deficit reduction versus growth".

But there is an even better way to discuss the national debt that in terms of a ratio to GDP, and that is in terms of it's cost.

The only downside to having debt is that you have to pay interest on it. But more debt doesn't necessarily mean higher interest payments – in fact, it's the exact opposite. Joe Weisenthal explains:

Using data from Bloomberg, we looked at basically all of the big emerging and developed markets* with a big bond market, and good data on debt to GDP and decided to check to see if there was any connection at all between debt to GDP and the yield on their 10-year bonds.

The answer, quite clearly, is no.

In fact, using an exponential regression, we detect a slight shift down and to the right, meaning that the more debt a country has relative to its GDP, the cheaper it is to borrow.

As debt goes up, interest rates go down. So doubling debt doesn't double interest payments, and halving debt doesn't mean you pay half as much servicing it. In chart form, that claim looks like this:

 

Our interest rates are so ridiculously depressed at the moment that even though we've almost doubled our national debt to GDP ratio, the amount we pay to service our debt has barely gone up by half.

This is what the debt hawks should be looking at. Not debt to GDP, and certainly not absolute debt; nothing matters to debt except the cost of holding it. And that cost doesn't present a particularly compelling reason for cutting it.

Gold, as a common and universally accepted store of value, is particularly useful to illustrate stories about abstract economic concepts like debt. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Who will win in Copeland? The Labour heartland hangs in the balance

The knife-edge by-election could end 82 years of Labour rule on the West Cumbrian coast.

Fine, relentless drizzle shrouds Whitehaven, a harbour town exposed on the outer edge of Copeland, West Cumbria. It is the most populous part of the coastal north-western constituency, which takes in everything from this old fishing port to Sellafield nuclear power station to England’s tallest mountain Scafell Pike. Sprawling and remote, it protrudes from the heart of the Lake District out into the Irish Sea.

Billy, a 72-year-old Whitehaven resident, is out for a morning walk along the marina with two friends, his woolly-hatted head held high against the whipping rain. He worked down the pit at the Haig Colliery for 27 years until it closed, and now works at Sellafield on contract, where he’s been since the age of 42.

“Whatever happens, a change has got to happen,” he says, hands stuffed into the pockets of his thick fleece. “If I do vote, the Bootle lass talks well for the Tories. They’re the favourites. If me mam heard me saying this now, she’d have battered us!” he laughs. “We were a big Labour family. But their vote has gone. Jeremy Corbyn – what is he?”

The Conservatives have their sights on traditional Labour voters like Billy, who have been returning Labour MPs for 82 years, to make the first government gain in a by-election since 1982.

Copeland has become increasingly marginal, held with just 2,564 votes by former frontbencher Jamie Reed, who resigned from Parliament last December to take a job at the nuclear plant. He triggered a by-election now regarded by all sides as too close to call. “I wouldn’t put a penny on it,” is how one local activist sums up the mood.

There are 10,000 people employed at the Sellafield site, and 21,000 jobs are promised for nearby Moorside – a project to build Europe’s largest nuclear power station now thrown into doubt, with Japanese company Toshiba likely to pull out.

Tories believe Jeremy Corbyn’s stance on nuclear power (he limply conceded it could be part of the “energy mix” recently, but his long prevarication betrayed his scepticism) and opposition to Trident, which is hosted in the neighbouring constituency of Barrow-in-Furness, could put off local employees who usually stick to Labour.

But it’s not that simple. The constituency may rely on nuclear for jobs, but I found a notable lack of affection for the industry. While most see the employment benefits, there is less enthusiasm for Sellafield being part of their home’s identity – particularly in Whitehaven, which houses the majority of employees in the constituency. Also, unions representing Sellafield workers have been in a dispute for months with ministers over pension cut plans.

“I worked at Sellafield for 30 years, and I’m against it,” growls Fred, Billy’s friend, a retiree of the same age who also used to work at the colliery. “Can you see nuclear power as safer than coal?” he asks, wild wiry eyebrows raised. “I’m a pit man; there was just nowhere else to work [when the colliery closed]. The pension scheme used to be second-to-none, now they’re trying to cut it, changing the terms.”

Derek Bone, a 51-year-old who has been a storeman at the plant for 15 years, is equally unconvinced. I meet him walking his dog along the seafront. “This county, Cumbria, Copeland, has always been a nuclear area – whether we like it or don’t,” he says, over the impatient barks of his Yorkshire terrier Milo. “But people say it’s only to do with Copeland. It ain’t. It employs a lot of people in the UK, outside the county – then they’re spending the money back where they’re from, not here.”

Such views might be just enough of a buffer against the damage caused by Corbyn’s nuclear reluctance. But the problem for Labour is that neither Fred nor Derek are particularly bothered about the result. While awareness of the by-election is high, many tell me that they won’t be voting this time. “Jeremy Corbyn says he’s against it [nuclear], now he’s not, and he could change his mind – I don’t believe any of them,” says Malcolm Campbell, a 55-year-old lorry driver who is part of the nuclear supply chain.

Also worrying for Labour is the deprivation in Copeland. Everyone I speak to complains about poor infrastructure, shoddy roads, derelict buildings, and lack of investment. This could punish the party that has been in power locally for so long.

The Tory candidate Trudy Harrison, who grew up in the coastal village of Seascale and now lives in Bootle, at the southern end of the constituency, claims local Labour rule has been ineffective. “We’re isolated, we’re remote, we’ve been forgotten and ignored by Labour for far too long,” she says.

I meet her in the town of Millom, at the southern tip of the constituency – the opposite end to Whitehaven. It centres on a small market square dominated by a smart 19th-century town hall with a mint-green domed clock tower. This is good Tory door-knocking territory; Millom has a Conservative-led town council.

While Harrison’s Labour opponents are relying on their legacy vote to turn out, Harrison is hoping that the same people think it’s time for a change, and can be combined with the existing Tory vote in places like Millom. “After 82 years of Labour rule, this is a huge ask,” she admits.

Another challenge for Harrison is the threat to services at Whitehaven’s West Cumberland Hospital. It has been proposed for a downgrade, which would mean those seeking urgent care – including children, stroke sufferers, and those in need of major trauma treatment and maternity care beyond midwifery – would have to travel the 40-mile journey to Carlisle on the notoriously bad A595 road.

Labour is blaming this on Conservative cuts to health spending, and indeed, Theresa May dodged calls to rescue the hospital in her campaign visit last week. “The Lady’s Not For Talking,” was one local paper front page. It also helps that Labour’s candidate, Gillian Troughton, is a St John Ambulance driver, who has driven the dangerous journey on a blue light.

“Seeing the health service having services taken away in the name of centralisation and saving money is just heart-breaking,” she tells me. “People are genuinely frightened . . . If we have a Tory MP, that essentially gives them the green light to say ‘this is OK’.”

But Harrison believes she would be best-placed to reverse the hospital downgrade. “[I] will have the ear of government,” she insists. “I stand the very best chance of making sure we save those essential services.”

Voters are concerned about the hospital, but divided on the idea that a Tory MP would have more power to save it.

“What the Conservatives are doing with the hospitals is disgusting,” a 44-year-old carer from Copeland’s second most-populated town of Egremont tells me. Her partner, Shaun Grant, who works as a labourer, agrees. “You have to travel to Carlisle – it could take one hour 40 minutes; the road is unpredictable.” They will both vote Labour.

Ken, a Conservative voter, counters: “People will lose their lives over it – we need someone in the circle, who can influence the government, to change it. I think the government would reward us for voting Tory.”

Fog engulfs the jagged coastline and rolling hills of Copeland as the sun begins to set on Sunday evening. But for most voters and campaigners here, the dense grey horizon is far clearer than what the result will be after going to the polls on Thursday.

Anoosh Chakelian is senior writer at the New Statesman.