Did Labour overspend?

Labour’s leadership contenders have been tripping over themselves to say that Labour overspent in government

Labour leadership


Labour’s leadership contenders have, depressingly, been tripping over themselves to tell a waiting media that Labour overspent in government. This seems as damaging for the future of the party as remaining silent about Labour’s public spending performance in the months after the 2010 general election defeat.

Tom Watson, on the BBC’s Sunday Politics programme, dismissed overspending concessions to the media in an interview with Andrew Neil. Not only an honest answer but one supported by the facts. So well done, Tom, for not falling into a bear trap that is potentially as damaging to Labour as the Tories’ constant reminders of the ‘Winter of Discontent’ from 1979 to 1997.

The reality, or course, is that Labour’s public spending between 1997 and 2007, when the international financial crisis hit, was not only affordable but vital to rebuild the public realm after eighteen years of Tory disinvestment.

As the chart shows, the UK’s net public debt to gross domestic product ratio, after one of the most cataclysmic financial crashes in history, remains historically low. And, I assume, no-one would argue that the UK wasn’t an economic success and a trade superpower for most of the 18th, 19th and 20th centuries.

Public debt Labour

Coming closer to the present, it is interesting to compare the debt record of the governments of Blair and Brown with those of Thatcher and Major. The very lowest debt to GDP ratio in the Tory years was recorded in 1991 at 25 per cent. But when the Tories left office in 1997, it had grown again to 42 per cent. Labour brought the ratio down to 36 per cent in 2007 before the onset of the credit crunch. But if Labour had achieved the very best of the Tory years, debt to gdp would still be 69 per cent today, equating to about £1.2tr in debt.

This underscores that ‘overspending’ by Labour in government was not a cause of today’s debt problem.

A second line of attack is that Labour should have ‘fixed the roof’ while the ‘sun was shining’. This won’t do either. What do commentators who raise this issue think Labour was doing from 1997 to 2007 when it raised NHS spending to the EU average, rebuilt local government services, invested heavily in education, partly rebuilt the public transport system, upgraded international development, created Sure Start centres across the country, kick-started the decent homes programme in social housing, invested in community regeneration schemes, introduced policies to tackle child and pensioner poverty, and created the Child Trust Fund?

It’s often forgotten that public services and infrastructure had fallen into disrepair by 1997 and that satisfaction with public services had plumbed the depths in the 1980s. The power of public investment to drive satisfaction is shown in the NHS where satisfaction doubled from 35 to 70 per cent between 1987 and 2007. It should also be remembered that Labour’s investment was supported by David Cameron and George Osborne as a means of getting into government; although forgotten soon afterwards.

Austerity is now dismantling much of what was achieved in the name of reducing the UK’s public debt, which is, after all, only average for the G20. That the UK was comparable to Greece in 2010 and ‘on the brink’ was a case of successful Tory spin and is not borne out by the facts. So keep correcting those interviewers Tom.

Kevin Gulliver is a contributing editor to Left Foot Forward and a director of Birmingham-based research charity the Human City Institute and chair of the Centre for Community Research. He writes in a personal capacity

Want to read more posts like this? Then *sign-up to Look Left* and make sure you have the facts to rebut right-wing spin

16 Responses to “Did Labour overspend?”

  1. GTE

    As usual, you’ve got a completely distorted view. You’re just in a fantasy land.

    Where are the pensions? You spent every penny of any pension contributions.

    Until the left takes on board that you’ve got a debt problem on the pension front, you are just in la la land.

    9,200 bn of debt hidden off the books now.

    Labour left a 5,010 bn pension debt rising at 636 bn a year.

    The Tories by the way have hidden the extent to which they have increased the pension debts. ONS have been told not to release any data on that.

  2. stevep

    Excellent article. Labour 1997-2010 did what Labour governments should do, spend on public services for the benefit of everyone. They should have used their colossal majorities to go further and re-nationalise public utilities and transport.
    The financial crisis was wholly the fault of reckless profiteering by the banks on a global scale, knowing full well that governments across the world would have to bail them out to save their economies if they collapsed. One could argue that it was a form of economic terrorism. Country after country knelt before their new masters, paid the ransom and let them carry on doing as they wished.
    Labour got the blame because, in a shameful act of political opportunity during a national crisis, The Tories and their far-right press sycophants concocted the notion that it was all Gordon Brown`s fault. In an unbelievable act of political stupidity Labour chose not to vigorously rebuff the accusation, losing the 2010 election as a result.
    Labour has to put across in layman`s terms exactly what happened to the economy and why, Reinforcing it with a hard look at what the Tories have failed to achieve in government. It then has to re-engage with a cynical British public and put forward a radical manifesto to rebuild and reshape the UK for the benefit of everyone, not just a privileged few.

  3. Harold

    A contributory factor is both Labour and the Conservative wanting to appease the media/press by cutting N.I. and taxes. The pension shortfall is not due today, but equally income to the Treasury should match the pensions going out, ideally work towards cutting the short fall. The newly elected Government looks to be making the situation worse, in five years the figure will have grown by an even greater amount. The same applies to the NHS everyone would appear to want the best we can get, I do, but we want it on the cheap, now handing part of the funding to shareholders without any improvements, if any are achievable, seems yet another backwards step. Look at PFI under Tory and Labour Governments and still going on cost a small fortune which could be spent on care, most PFI debt is now owned by overseas companies. Until we recognise what we want and then address how we will pay for it, the debate will continue.

    As to Labour not defending their record and attacking the Tories failing to meet every one of the targets they set themselves in 2010, let alone the borrowing of £250bn more, I am speechless. For all his wrongs Tony Blair would have had them back in their box by lunch time.

  4. Arizona1365

    It’s a bit too late now to be making the case that Labour didn’t overspend. Why wasn’t it robustly challenged since 2010 right up to the day of the election if it wasn’t true. I think what’s happening now is the Leadership contenders are going with the flow of public perception, ie that Labour did overspend, in order to draw a line in the sand and move on. If we keep harking back to 2010 or 1997 we’ll never look ahead to 2020. Let’s lose this particular battle and win the rest of the war.

  5. Steven Harness

    Gordon Brown took his eye off the ball and inflicted some damage on what was an excellent reputation as a prudent, redistributive and investing Chancellor. However, it is not the case that he overspent in relation to GDP. PFI was a huge mistake and has saddled taxpayers with high interest debt for the next thirty years. The Govt. could have borrowed the money directly at a much lower interest rate.
    We are now prey to a Nasty Government hiding behind austerity to achieve what it would want to do whatever the circumstances, namely make genuine public service a thing of the past.

  6. publicperson

    Labour lost because it was deluded into thinking: –

    1. Internal Party Democracy is not important any more.
    A view arose that in the modern era the Labour Party could
    be run by a narrow, cynical, amoral and manipulative clique fronted by good
    looking spokespeople attractive enough to win power as an end in itself. Once
    in power the goal would be to merely become re-electable.
    The reality is that without a broad church that offers hope
    to all factions of winning the argument and policy positions within the party
    there is no point in being a member, participating or persuading others to vote
    for you. You are wasting your breath.

    2. Failure to persuade people to vote was not a lost opportunity.
    The contrast between 66% turnout in the General Election and
    the 85% for the Scottish Referendum is the difference between winning or losing
    an election.
    The failure to engage and inspire, and concentrate on making
    historic supporters turnout was doomed.

    3. The UK is Tory and there is nothing to be done.
    This is ludicrous. The vast majority gain little from the
    current system. But that does not mean they trust Labour either to change it or
    not to make it worse.
    Unfortunately experience is that Labour has made little
    difference for most people.
    In fact less than 25% voted Tory

    4. The Labour Party can be trusted to do a good job when in office

    See Office for National Statistics “An International Perspective
    on the UK -Gross Domestic Product . Andrew Banks, Sami Hamroush, Ciaren Taylor
    and Michael Hardie, Office of the Chief Economic Adviser April 2014
    The reality seems to be that the big switch from production
    to services kicked in about the time of the Blair Government coming into power
    and the gap between the richest and poorest has grown.
    See also:
    Although the Labour Party praises itself for Surestart, childcare
    provision is much less than commonly found in Europe and its introduction
    doesn’t quite compensate for being captured by the City, selling old people’s
    homes, switching from direct to indirect taxation or undermining the NHS.
    5. Ignoring UKIP was a good policy
    UKIP were right to highlight uncontrolled immigration and
    membership of the EU as issues. By failing to address the deterioration in the
    economic position of the white working class and the relative powerlessness of
    the UK to act within the EU it was obvious that votes would be lost.
    6. Nothing was learnt from the success of the SNP
    The biggest lesson seems to be that a progressive majority
    can be awakened and energised. But it was regarded by the Labour Party as an
    embarrassment rather than a hint for how it may position itself and build
    support in other parts of the UK.
    7. Refusing to speculate on a hung Parliament would attract voters
    By refusing to be drawn into discussions about what may
    happen in the event of a hung Parliament there was a spurned opportunity to woo
    Liberal Democrats, Greens, UKIP and SNP voters. Without any indication that
    there was anything to be gained for those people nothing was gained.
    8. Failure to declare your hand is clever
    Refusing to risk alienating people who may disagree by
    spelling out what a Labour Government would do is not clever, but cowardly and
    If the narrative is not persuasive for the party’s leaders
    then you cannot expect it to be persuasive for others.
    9. Promises convince.
    The tablets of stone, as a cross between Tony Blair’s pledge
    card and an attempt to humiliate the Liberal democrats backfired. The promises
    were so paltry, vacuous or easy to avoid they only succeeded in demonstrating
    the shallowness and gimmickry that had gripped the party.
    10. Party funding does not remain an issue
    It seems that the Labour party is open to being bought by
    commercial and professional interests while taking Trade Union support for
    The source of political funding is important. Funders expect influence.
    By being embarrassed by Trade Union support and happy to let
    PWC or MacKinsey write its policies the Labour Party was selling itself.
    11. The Labour Party lost the argument on the economy.
    Saying what’s in the past is past and attempting to focus on
    the future was evasive. Not admitting that Gordon Brown was wrong on important
    things (although right on others), that the UK became over-dependent on financial services or that the state needs to be more active in the UK economy is not controversial but became so because
    Labour didn’t fight its corner.
    12. Appealing to aspiring voters is the key to success.
    Aspiration is what everyone has; hope and motivation is what
    too many lack. Changing policies to suit the already well off is to implicitly
    reduce hope and motivation for the many.

  7. AlanGiles

    sadly they are all falling over themselves to be seen as a safe pair of hands they begin to mouth the same platitudes. Creagh looks as if she has dozed off in the picture above – at any rate she doesn’t look leadership material.

  8. marje arnold

    i entirely agree with the above. cant understand why labour did not nail the lie and point out how much labour did for the country while in office after sorting out the deficit left by the tory`s. why oh why didnt they point out the amount that this government was borrowing – more than any labour government in history

  9. Bob Vant

    If you’d like to see very a very specific description of the mess we took over in 1997, and what we’d done to sort it out by 2010, look up ONE CONSTITUENCY, TWO GOVERNMENTS. It’s a Survey I did for the 2010 GenElec, and was based on looking for a new way to communicate with voters. I’d realised that there was little point in talking about “£x Billion on education…health….etc.” Our reputation for spin had put the mockers right on that. Also, voters were/are sceptical about standard political leaflets. The Survey aimed at engaging with voters on the bases of accepting they had good reasons to be sceptical, and giving them the wherewithal to make their own minds up. Sad to say – from my point of view, any road – we did next to nowt with the Survey in 2010 in the Colne Valley Constituency……I did my best to pass it on to someone Up There, but got nowhere…….have carried on doing that since 2010 whenever someone comes up with the “We didn’t defend our record in government!” but without success……

  10. Mike Stallard

    Kevin, I am 76 years old. Do you remember Sunny Jim? Do you remember beer and sandwiches at Number 10? Perhaps you remember Mr Scargill and the miners’ strike too? I was there when we huddled over a meagre coal fire in the dark in the 1970s.
    I was there when Mr Blair got elected on a promise to keep the economy on the same even keel that Mr Clarke left it in after Black Wednesday – a most terrible judgement on the ERM.
    I was there when Mr Blair promised to start spending money on Schools’n’hospitals two years after he entered office on a landslide.
    I was there when the national debt soared to 500 billion pounds. And I was also there when Mr Brown introduced the Financial regulator and got rid of the Bank of England, thus opening the way for the corruption and the crash of 2008.
    I was there, too, when all this was suddenly “repaired” by the new Tory led government and the debt then increased, over their tenure, to one and a half trillion pounds. Some cuts there!
    Now they are not even facing the debt at all – just the deficit.
    And the Labour response? Rioting in the streets against the totally imaginary cuts!

  11. Norfolk29

    It does not matter at all whether Labour overspent or not, failed to fix the roof when the sun was shining or not, ran the economy into the ground or not, it was put out by the Tory propaganda machine and fed regularly into the drip feed of the people who vote that Labour was responsible for the 2007/8 financial crash. What was Labour doing at the time? Well, they were led by two Scottish gentlemen, who would not sully their hands dealing with such low propaganda. They were dealing with the effects of the crisis and doing so successfully. Surely everyone could see that. Certainly most other western countries saw that, as they copied our methods. What Labour currently need as a Leader is someone who can match the Tory propaganda machine and we will be out of power until we find one. None of the candidates currently standing for the Labour leadership is anywhere near that good and we will be out of power until that person is identified and made leader. Can anyone imagine the leadership race in 1994 in which Gordon Brown could have been elected leader? Well, imagine on, as none of the leadership candidates is even as good as Gordon Brown.

  12. Norfolk29

    Labour should also have reformed the voting system, reformed the selection process for the Labour leadership and regulated the banking and financial systems. Instead they simply concentrated on rebuilding the economy and taking us from 8th in the world GDP stakes to contending with the Germans for 4th place, despite Germany having 150% of our population. A lot of wasted opportunity caused partly by vanity and the need to respond to the 911 bombing in New York.

  13. RoyB

    The Tory lie wasn’t challenged because focus groups told Ed Balls to look to the future, not the past. Which only goes to show both the stupidity of relying on focus groups to show political judgment and the political ineptitude of Balls, along with most of the Labour leadership. The current batch of contenders are showing exactly the same ineptitude – the focus groups are telling them that they need to apologise, presumably because the lie is now so deeply entrenched that it cannot be denied. An apology will be political suicide for Labour. The Tories will simply milk it to show that Labour both lied about its economic record and now admits to having caused the crash. Subleties about debts and deficits are beyond the grasp of public opinion.

  14. Matty

    Great comment, sometimes (and this was certainly one of them) a bit of strength and leadership is required

  15. WhiteVanMan

    Just because she’s got short hair, I inow we can’t have bald leaders of parties but what next

  16. AlanGiles


Leave a Reply