I SPENT most of last week canvassing at the Eastleigh by-election.

One of the things I encountered on the doorstep was an enormous confusion about the deficit and the national debt.

So let me explain.

The deficit is the amount the government is spending in excess of its tax revenues. It bridges this gap by borrowing. The national debt is the total stock of debt that the government has built up over decades and even centuries.

Clearly, the bigger the deficit, the faster the national debt will grow and, if the deficit is eliminated when the government runs a surplus of revenue over spending, then the national debt can start to fall as the surplus is used to repay debt.

The coalition government inherited the worst peacetime deficit in our history and the worst among developed economies.

A large part of the deficit was judged to be ‘structural’, ie it was run-away spending that we could never expect to be covered by rising tax revenues when the economy recovered. It had, therefore, to be eliminated quickly in order to avoid financial ruin.

One of this government’s central achievements has been to reduce the deficit by more than 25 per cent.

Of course we need to eliminate it all, but economists argue about how fast this should be done: do it too quickly with very sharp cuts in government spending and you could cause such a dive in economic activity that tax revenues fall even faster and the deficit ends up getting worse; go about it too slowly and the financial markets will lose confidence in your determination to deal with the problem and it will get much harder to find willing lenders, rates will shoot up so that the higher interest payments increase the deficit.

However tough it may seem, I think that this government has got it about right in steering a course between the two extremes.

After all, unemployment has fallen and private sector employment has risen sharply by one million since the election: there are now more people in work than ever before in our history.

There are very few people, apart from the Opposition, who believe we would solve our problems if we were only to borrow and spend another couple of hundred billion quid.

The economy is in the recovery room but it is going to be there for a long hard slog and, in recognition of this, Moody’s has reduced our triple A credit status by one notch.

This is not a rebuke for failure; rather it is a warning not to backslide: we just have to carry on getting that deficit down