The Labour party got it wrong. Just not in the way you think
The Labour party got it wrong. Not, as is commonly supposed, by spending too much in government, but by allowing that charge to stick in opposition. After losing the election back in 2010, rather than effectively setting out the real causes of the financial crash Labour got itself embroiled in a lengthy leadership contest – it wasn’t until September, four months after the election was lost, that Labour had a new leader in place.
Similarly, despite backing Labour spending plans right up until 2008, George Osborne and the Conservatives were allowed to position themselves as the only prudent choice at the 2010 General election.
The hangover from Labour’s error persists today in the public’s continued reluctance to trust the party on the economy. YouGov’s tracker currently gives the Tories a 17-point lead on economic trust – 40 per cent to 23 per cent.
The argument was lost five years ago, and thus it might plausibly be argued that getting embroiled in the argument again is a fruitless task.
However it’s important to (repeatedly) set the historical record straight, especially when another egregious claim is also doing the rounds – George Osborne recently claimed that the “economy was contracting when we came to power” (it wasn’t).
And so here are two graphs which, while not exactly game-changing at this stage, are nevertheless worth looking at as a reminder of some of the nonsense emitted by the Conservatives over the course of this parliament.
Firstly, on the myth of ‘out of control spending’. As the graph below demonstrates, government debt as a percentage of GDP was well below average under Labour and rose, predictably, as aresult of the collapse in tax receipts when the economic crisis hit – as it would. In the years leading up to the 2007/08 crisis – the supposedly spendthrift years – UK net public debt was close to its lowest ratio to GDP in 300 years.
Nor was this ‘Labour’s crash’ – unless you think Labour was in power in the United States when the sub-prime housing bubble burst and Lehman Brothers collapsed. I’m sure you’re not that silly.
As for the spurious claim that the economy was contracting when the coalition came to office in 2010, in reality it was growing when Labour left office – and nosedived only after George Osborne’s ’emergency budget’ in October of that year, when he set out big cuts to public spending.
The country had to wait another two-and-a-half years before the economy started to grow again at the rate it had been growing in May 2010. In the intervening period we saw wage stagnation, ‘flatlining’ GDP and the loss of the triple-A credit rating.
So yes, the Labour party got it wrong. Just not in the way you probably think.
James Bloodworth is the editor of Left Foot Forward. Follow him on Twitter
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21 Responses to “Once again on the myth of Labour’s ‘out of control’ spending”
Norfolk29
Only one in seven people believe that Labour was not reonsible for the 2008 crash. Gordon Brown and Alistair Darling were not involved in the leadership contest and failed to rebut the Tory claim that Labour had crashed the economy. Cameron and Osborne attached no blame to the banks, despite the banks apologising for their part in the crash. This was a failure that took place before the 2010 election where Gordon Brown failed to persuade the public that the crash was caused by a lack of regulation of the financial system.
sparky
You don’t understand the cause of the Crash. What happened was this.
Far more people defaulted on paying mortgages in the US than institutions expected. Institutions had built standard deviation bands into the models of mortgage defaults based upon what had happened in the past. Unfortunately these models were inaccurate, but there was no way of knowing this at the time since they had been used historically perfectly successfully.
When very large numbers of mortgage holders defaulted, assets that been secured on those mortgages were written down, in some cases by 100%. Some institutions with very heavy exposure to these went bust. Others had to bailed out by the state.
No criminal acts were commited by people working in banks, they merely used erroneous models. It happens in the financial markets, because what has happened in the past is not nevessarily what will happen in the future.
However, modelling is essential to all financial products. It’s what lies behind your home and car insurance, your bank overdraft facilty, and your present mortgage.
The Crash was also nothing to do with tax dodging, fat cats, the Wolf of Wall Street or any other populist imagery of evil, greedy bankers. It was a failure of economic modelling.
Ali
What delusional rubbish!! Who agreed those mortgages in the first place?? The ‘economical modelling’ to which you refer is necessary only for banks to maximise their profits.
The sooner control of money (and debt) creation is removed from the banks the better……..
Leon Wolfeson
It’s useful to counter the Tories outright lying on this.
TTIP is an issue which won’t be decided in the UK. It’ll be decided on an EU level, and that’s where the lobbying for opposing it is worthwhile.
Leon Wolfeson
Quite. But instead, at conference, they chose to lead with a child benefit freeze and refusal to allow borrowing for council housing. They’re still stuck in a Austerity mindset, committed to a benefit cap which is going to severely slash benefits.
:/
(Meanwhile, Reeves…)