Ed Miliband is right to expose the Tory “deceit” on debt

Green Politics

Ed Miliband has come out fighting in today's Times pointing out Tory "deceit" on the deficit. The truth is uncomfortable for the Government.

Ed Miliband has come out fighting in today’s Times arguing that “a great deceit designed to damage Labour has led to profoundly misguided and dangerous economic decisions”. The truth is uncomfortable for the Government.

Ed Miliband writes (£):

“What is this deceit? It is that the deficit was caused by chronic overspending rather than a global financial crisis that resulted in recession and a calamitous collapse in tax revenues. One pound in every five of corporation tax disappeared in 2009-10. Their deceit ignores the evidence from around the world that a global credit crunch caused deficits to rise on every continent. The US and Japan face deficits of the same scale and for the same reason.

“Their deceit seeks to rewrite history, airbrushing out the fact that Britain’s debt at the outset of this crisis was the second-lowest in the G7; lower than it was under the Tories in 1997. And it forgets that neither of the two parties now in government called for lower spending at the time.”

How true. The Tories were committed to sticking to Labour’s spending plans until after the collapse of Lehman Brothers on September 15th, 2008. As the graph below shows, it was only as tax revenue fell through the floor and “automatic stabilisers” – like unemployment benefits and increased tax credits – kicked in that the deficit opened up. Prior to that point, the modest Public Sector Borrowing Requirement was due almost entirely to capital spending – entirely acceptable under the old fiscal rules.

Chart: Public spending and revenue (% GDP)

But in his 2009 new year’s message, David Cameron opportunisticially referred for the first time to Labour’s “debt crisis“. He followed up with a speech that March on “Labour’s debt crisis”. The Conservative propaganda around George Osborne’s conference speech in 2009 referred repeatedly to “Labour’s debt crisis” and David Cameron continued the attack after the general election.

Going into May 2010, the Lib Dems supported Labour’s spending plans (although that didn’t stop some of their candidates distorting the facts on debt). The Lib Dems only diverged from Labour’s fiscal policy at some point after they first sniffed the scent of power in that dramatic weekend in May. Yet by August they’d completely forgotten their pre-election policy with Chris Huhne taking the Tory line and declaring:

“A decade of spend, spend, spend meant Labour hid their heads. And they are still hiding them. Labour’s leadership candidates say that spending was not the problem. It was taxes. Nonsense.”

Understanding the truth about the deficit is critical to understanding the right response. Rhetoric about a “debt crisis” only raises expectations for calamitous policies like the rapid cuts to public services or the ideological rise in VAT which was only necessary to pay for tax cuts to corporation tax, council tax, national insurance, and income tax. Don’t be fooled.

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62 Responses to “Ed Miliband is right to expose the Tory “deceit” on debt”

  1. reded

    Of course it was the banks, we must remind ordinary working people all the time by pointing out the bonuses these greedy plutocrats still enjoy despite destroying our economy and our ecology.

  2. Cassandra

    Good article by Ed but it has taken him and his team a very long time to address this key point.

    He needs to bang this particular drum a lot louder.

    Call for a Commission of Inquiry into the causes of the bust and bailout. How can we make sure it never happens again if we do not understand what went wrong. Current Banking Commission is fundamentally flawed. Is not taking evidence in public, has no power to compel production of documents, no pwer to take evidence on oath.

    The public HATE the bankers. They hated Brown as well but they got the chance to give him a good kicking and see Labour humbled and apologetic.
    The bakers have never been humbled and have never apologised.

  3. Don't Break Britain

    Ed Miliband exposes government 'deceit' over deficit in today's Times http://bit.ly/i8ce7e

  4. Heather Tweddell

    RT @leftfootfwd: Ed Miliband is right to expose the Tory "deceit" on debt http://bit.ly/gmo0Z8

  5. Gary Banham

    What caused the UK deficit? Not Labour spending: RT @leftfootfwd: Ed Miliband is right to expose the Tory "deceit" on http://bit.ly/gmo0Z8

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