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Original poster

Once again on Labour’s ‘out of control’ spending

34 replies

ttosca · 24/04/2013 16:03

Some things are worth repeating because they are that important and some things should be repeated because they were not heard, or listened to, the first time.

Brown DarlingSome things fall under both categories.

It is testament to a failure in communication on the left that in the years immediately after the financial crisis the consensus was allowed to form that under Labour spending got out of control. The hangover from this communication failure persists in the public?s continued reluctance to trust Labour on the economy.

It is seemingly forgotten now, but the Tories promised to match Labour?s spending plans right up until 2008; in the aftermath of the 2010 election, however, a drawn-out Labour leadership contest allowed David Cameron to define the post-crisis landscape as the hangover of a spendthrift Labour Party.

The country was in a mess and the only ones who could clear that mess up were the Conservatives, who would reign in the excesses of the Blair and Brown years and bring some temperance to proceedings.

It is worth repeating, then, something pointed out by Martin Wolf in today?s Financial Times (£): in the years leading up to the 2007/08 financial crisis ? the supposedly out of control, spendthrift years ? UK net public debt was close to its lowest ratio to GDP in the past 300 years.

As the graph below shows, government debt as a percentage of GDP was well below average under Labour and rose, predictably, as a response to the collapse in GDP ? as it would. And why does this matter? Because the relevance of the amount of money spent by government is related to how big a proportion of GDP it is, not how much is spent in total.

While debt is now higher than it has been for a considerable period of time, the blatant dishonesty in the claim that spending was out of control under Labour has more to do with finding a rationale for stripping back the state than it does with dealing with any perceived ?debt crisis?.

www.leftfootforward.org/2013/04/once-again-on-labours-out-of-control-spending/

OP posts:
flatpackhamster · 25/04/2013 11:10

ttosca

Here is the UK historical chart for interest/GDP ratio:

^www.ukpublicspending.co.uk/spending_chart_1900_2015UKp_12c1li011mcn_90t^

In 2007, it was at an almost 90 year lowpoint.

And what does that chart mean?

Well, what it means is that it was cheaper for us to sell debt than at any other time.

It isn't an argument for raising the debt. It's an argument for cutting it, or at the very least renegotiating it and paying off as many old, high-interest debts as possible. It certainly isn't an argument for taking out more loans.

What you mean to say is that you prefer a smaller state and lower public spending, whatever the interest, whatever the cost.

If I was a big-stater, then the argument would run that by paying off the debt, there would be more money to spend on social welfare programs. £30Bn a year more? Just think how many diversity co-ordinators that would buy.

niceguy2 · 25/04/2013 09:59

But looking at the ratio is misleading. The actual debt is shown on this graph using the site you used above:

www.ukpublicspending.co.uk/downchart_ukgs.php?chart=G0-total&year=1900_2011&units=b&state=UK

Xenia · 25/04/2013 09:49

Person asking what is the figure of the national debt it is on this link but changes every second so I cannot cut and paste

www.debtbombshell.com/

Original poster
ttosca · 25/04/2013 09:13

flatpack-

I have seen that argument wafted around too, and I disagree with it. The UK was spending £27.Bn a year of our tax revenues merely paying the interest on the national debt in 2007. That was 80% of the defence budget.

Here is the UK historical chart for interest/GDP ratio:

www.ukpublicspending.co.uk/spending_chart_1900_2015UKp_12c1li011mcn_90t

In 2007, it was at an almost 90 year lowpoint.

I consider that a serious problem. Paying off the national debt makes us all richer and happier in the long term.

What you mean to say is that you prefer a smaller state and lower public spending, whatever the interest, whatever the cost.

OP posts:
flatpackhamster · 25/04/2013 07:28

Everyone apart from mentalists on the far left knows Labour spent like a crack addict, and feeble attempts to rewrite their disgraceful past won't change that.

CogitoErgoSometimes

The level of the debt in the run up to the crisis wasn't the problem.

I have seen that argument wafted around too, and I disagree with it. The UK was spending £27.Bn a year of our tax revenues merely paying the interest on the national debt in 2007. That was 80% of the defence budget.

I consider that a serious problem. Paying off the national debt makes us all richer and happier in the long term.

niceguy2 · 24/04/2013 22:58

You could see the bust coming a mile off and the inevitable recession. The only question was when?

MrJudgeyPants · 24/04/2013 22:13

All growth from sometime around 2002/3 onwards was built on sand. I read an interesting article the other day, the gist of which was that the dotcom bust should have caused a small recession sometime after the millennium. To prevent this small recession central banks around the world reduced interest rates in an effort to stave off the inevitable. This in turn lead to a surplus of cheap credit (and consequent malinvestment) which, amongst other things, led to the unsustainable housing bubble, an unsustainable boom in consumer spending and also allowed governments to borrow money at historically low rates. The rest is history. It may be that this theory is wrong but it seems, at least to me, to be quite a convincing economic history of the last decade.

The obvious conclusion to draw from this is twofold. Firstly that turning the economic clock back to 2007/8 and the start of the current recession won?t fix the problem. The whole economy was already skewed towards unsustainability by then. By extension this means that the government?s recovery strategy (and that advocated by all major political parties in the UK, across the EU and the US) is wrong and that any real recovery will see yet more ?growth? wiped off our collective GDP?s. The second conclusion is that the currently low interest rates will be continuing to create malinvestment within the wider economy. Needless to say, the remedy for that is politically unpalatable as raising the interest rates in a recession is both economic and political suicide.

Now it wouldn?t be a JudgeyPants rant without blaming ?big government? for all our woes but, in this instance, the state ? in the form of the big central banks ? is entirely responsible for causing this problem. To that end, this recession was the fault of our governments, Labour included.

CogitoErgoSometimes · 24/04/2013 17:22

The level of the debt in the run up to the crisis wasn't the problem. It was the over-heavy current public spending. Fine as long as the banks kept chunking out the money but as soon as the wheels came off and the tax revenues fell away, the public spending was exposed as being unsustainable.

niceguy2 · 24/04/2013 16:34

Labour blame Tories, Tories blame Labour. Lib Dems blame both. SNP blame Westminster. Al Queda blame infidels.

Nothing really new. Par for the course. How we got to where we are is almost academic nowadays.

What I'd like your view on is:

  1. What is our current total debt in pounds? Not as a percentage, not the deficit. The actual debt itself. Doesn't have to be exact. A ballpark is sufficient.

  2. Are we paying ANY of this debt back? If the answer is no, when do you think would be a good time to pay some of this debt back? Now, ten years, twenty, never?

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