Did Labour overspend?

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

 

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

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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.

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