By Colin Talbot

If there's one area where politicians can lie without consequence, it's public spending numbers. Watch PMQs and you'll see party leaders throwing figures about the NHS, schools and policing at each other like they're snowballs. Most of the time these numbers can be justified – but that doesn't mean they're strictly true. They use all sorts of tricks to stick to the letter of factual accuracy while doing their best to mislead voters.

This is a simple guide to deciphering the truth from the spin.

'There are no real cuts'

This is the nominal number ploy. Mainly beloved of the Tory right wing it uses the simple 'pounds being spent' figure to claim that spending is really rising and that there therefore isn't really any austerity. John Redwood is especially assiduous in peddling this line.

It is, of course, nonsense, and for one simple reason: inflation. We all know that £100 spent this year will not buy us the same next year because prices generally rise. Whether measured by RPI (the Retail Prices Index) or CPI (the Consumer Prices Index) the cost of 'stuff' goes up.

In practice these generic measures of inflation often underestimate the real inflationary pressures on public spending. So health spending, as probably the most important example, is generally thought to need to rise by about four per cent above the rise in general inflation just to keep up with increasing costs and demands on the NHS.

The most contentious example at the moment is public sector pay, where for seven years we have had a one per cent cap in place on pay increases. Under the nominal spending trick, public sector workers have been getting pay rises fthe whole time. In the real world, we all know they have been getting pay cuts.

The real-terms spending ploy

Slightly more sophisticated is the notion that if public spending just keeps up with inflation – real-terms spending – then we're still not seeing proper austerity.

There are two main problems with this.

The first, as mentioned above, is that general inflation does not account for sector specific rising costs. Health is the most obvious example, but there are other areas where simply 'keeping up with inflation' does not really mean a 'stand still' budget.

The second issue is the general rise in wealth of a society – measured mainly by growing gross domestic product (GDP). GDP, rightly, has its critics as a measure but it does try and reflect the growth in wealth of a society.

Most experts would say that it is public spending as a percentage of GDP that gives the most realistic figure for how much we devote to public ends.

So, for example, when Tony Blair committed the New Labour government to raise UK health spending to the EU average (from about five per cent of GDP to about eight per cent at the time) that was a significant commitment.

However, public spending as a percentage of GDP can also be highly misleading. If, as for example happened in 2007-08, the economy suddenly crashes, public spending as a percentage of GDP suddenly rises even though actual spending hasn’t really changed.

This can be used as a political argument – for example it was used by the Tories in 2008 to denounce Labour 'over spending' even though spending had not really changed. It just hadn't been cut.

Roll-up, roll-up: exaggerating public spending by multi-year totals

One of Gordon Brown's foibles when he was chancellor was the 'roll up ploy'. This took the usual form of saying 'we are going to spend £200 squillion extra on something nice'. What it didn't explain was that this was £200 squillion over three, four or five years, so it was really only £50 squillion or so a year, which sounds rather less impressive.

The Treasury select committee, to which I was a regular expert witness and sometime special adviser,complained regularly about this 'roll-up ploy'. As did, incidentally, the opposition. Of course, as soon as the opposition became the Government in 2010, they proceeded to use the same ploy both positively (to boast) and negatively (to denounce their predecessors' profligacy).

This multi-year totaling ought to be simply eliminated from all discussions about public spending because it is deeply confusing and misleading. Unfortunately politicians of all parties find it useful, both positively and negatively.

Public spending equals 'consumption'

Probably the most pernicious myth about public spending is that it is all 'consumption'. One of the most vociferous purveyors of this myth is former CBI director general Digby Jones who constantly bangs on about the 'wealth creating' private sector versus the 'wealth consuming' public realm.

A moment's serious thought explodes this superficial thinking. A modern economy needs workers who are well-educated and healthy enough to turn up to work. So is health and education spending 'consumption' or a vital part of the wealth creating function of the economy?

Of course, not all health and education spending is productive – but an awful lot of it is and without it our economy would flounder. It is why, if you look around advanced economies, they all spend vastly more on health and education as a proportion of national wealth creation than they did 100 years ago.

So the next time a politician tells you we can have £350m a week extra for the NHS just by leaving the EU – beware. If it sounds too good to be true, it probably is.

Colin Talbot is emeritus professor of Government at the University of Manchester and is also associated with University of Cambridge Public Policy. He has been an expert witness in parliament more than two dozen times, been an adviser to two select committees, and advised governments around the world. He is a regular analyst of government, here and abroad, in both academic publications and the media.

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