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
21 Responses to “Once again on the myth of Labour’s ‘out of control’ spending”
Norfolk29
He technically could have resigned. That would have been the honourable way. Like Harold Wilson in 1976 or Eden in 1957. He was unfit for office and someone should have been brave enough to tell him.
Leon Carter
but the Global crash would still have happened as by then and before it was too late as we cannot control the dollar however much regulation there is
doolols
And the fixing of the ratings for the derivative products, which were sold and re-sold, bankers collecting fees and commissions each time?
““We conclude the failures of credit rating agencies were essential cogs in the wheel of financial destruction. The three credit rating agencies were key enablers of the financial meltdown. ”
http://www.forbes.com/sites/tedkaufman/2013/07/30/political-will-falters-on-fixing-credit-ratings-agencies/
No, it was just a bad financial model. Nothing to see here. Move along.
Pernickety
We’re seven years on and people are still saying “it was X’s fault! Bloody X!”. Has anyone stopped to think that maybe there was (and still is) a systemic fault with the whole picture? Might it be a combination of politicians mucking around for power, banks being stupid with risks, business owners trying to maximise their own profits, members of the public spending tons of money they didn’t have, credit firms offering money to those they shouldn’t have – the list goes on. There wasn’t one cause to this. There’s no single person, class, entity or otherwise to blame; it was the definition of omni-shambles.
robertcp
I agree with nearly all of this article. The problem was, however, that the Labour government should have known that something was very wrong with the economy and tried to mitigate the inevitable crash. Instead, there were ridiculous comments about ending boom and bust, as well as giving Fred Goodwin a knighthood!