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.
62 Responses to “Ed Miliband is right to expose the Tory “deceit” on debt”
william
This is a pathetic piece by a PPE graduate who worked in the Treasury.Brown’s excessive spending is neatly posted on Guido Fawkes. And that is ignoring the Enron type accounting of PFI and public sector pensions.The markets had spotted it, and belatedly the Coalition,thank goodness.When will Labour come up with a politician of the calibre of Roy Jenkins?
Mike Thomas
Ah, as a I thought the graph shows % GDP.
So, as Labour had to follow the Conservative spending plans up to 2000, you can see spending as a line under revenues. A surplus thanks to Ken Clarke’s excellent stewardship of the economy and Labour’s craven attempt at building up some economic credibility.
Then as Brown let rip (bar a small matter of £40bn for the 3G licenses), you see spending outstrip revenues during the long asset boom of the mid-2000s.
Mentioning ‘automatic stabilisers’ is then an opt-in to Keynesian economics which begs the question.
WHERE WAS THE SURPLUS TO PAY FOR THEM?
Also, if you dig deeper, Labour were adding on average 1.2% GDP onto the national debt from 2003 onwards propelling way above what was inherited in 1997.
As the ‘once-in-a-hundred’ years calamity happens, the entire Western world required deficit financing bar only Germany, Australia and Canada. They had wisely built up surpluses. The UK is now is a beggar-thy-neighbour race to the bottom to preserve liquidity and is forced into austerity to maintain credibility with the world’s financiers.
What was Brown advice to Germany in 2006? How they should adopt the Anglo-Saxon model?
Labour were beyond inept and if they think they can send out Brown’s milk monitor to defend their record, you must be seriously deluded.
Matthew Davis
Total spending had clearly been rising rapidly from 1999 as your own graph shows.
The debt of approx £70billion at the start of the recession was not ‘modest’.
Even if for capital expenditure, debt is still debt and incurs interest (in effect) for ever.
Labout cannot deliver sound money and cannot take difficult decisions (eg, saying no to more debt).
Murray
Ed Miliband is right to expose the Tory "deceit" on debt | Left Foot Forward – http://bit.ly/eTz7fz
Johnnydub
When are people going to stop blaming the bankers?
It’s real simple:
1) The banks actions caused a recession
2) Labour managed the economy into a position where it couldn’t withstand a recession without incurring massive deficits
Was Labour’s failure to manage public spending in the economy becuase the Treasury believed Brown’s fatuous claim to have eliminated “boom and bust”?