Jeremy Corbyn is right to blame the banks, not Labour, for the financial crisis

[blacksunday]

Here’s a question for you. Consider the following statement: “We must live within our means, so cutting the deficit is the top priority.” Do you agree?

If you said yes, you are with the majority. If you said no and are a member of the Labour party, you are almost certainly planning to vote for Jeremy Corbyn to be its next leader.

The question was put as part of Labour’s inquest into why it lost in May and, according to Ed Miliband’s policy coordinator, Jon Cruddas, is evidence that the party’s austerity-lite message was not tough enough. He said in a blog post: “We can seek to change the views of the public, but it’s best not to ignore them.”

Fair enough, you might think. Labour lost because it wasn’t credible on the economy and the reason it wasn’t credible was because the electorate thought Miliband would borrow and spend too much. If this was a game of Cluedo, the solution would not be Colonel Mustard with the lead piping, but George Osborne with the budget deficit.

The conclusion, therefore, is simple. To avoid defeat in 2020, Labour needs to get back in tune with the electorate by showing that it too would balance the budget even if doing so means welfare cuts. The message from the party’s grandees is that the flirtation with Corbyn is all very well but it is now time to stop being silly. However, it appears the message is falling on deaf ears.

Why is that? Why are Labour supporters determined to resist the message from the 58% that say “we must live within our means, so cutting the deficit is the top priority”?

In part, it is because most Labour members have spent the past five years believing that there was no overspending or reckless borrowing in advance of the deep recession of 2008-09. Instead, they have always said the reason for the crisis was that the banks were too laxly regulated and in consequence were given licence to blow up the economy. They suspect that Andy Burnham, Yvette Cooper and Liz Kendall by and large agree, but have decided the line to take is that while Labour did not do anything wrong, political reality means they need to apologise anyway.

Corbyn is the only candidate sticking to the line that the banks were to blame and he is reaping the benefit. Not least because he is absolutely right.

Support for this argument has helpfully been provided by a recent House of Commons briefing paper from Matthew Keep. This looks at three separate measures of the public finances: the size of the budget deficit, the size of national debt as a proportion of the economy’s output (gross domestic product) and the percentage of GDP swallowed up by interest payments on the national debt.

Cont'd...

www.theguardian.com/business/2015/aug/09/jeremy-corbyn-labour-overspending-did-not-cause-financial-crisis

This is a straw man argument repeatedly put forward by Labour supporters. The Conservatives have not said that Labour's overspending caused the crisis. It didn't. It did, however, mean that the recession was deeper and longer lasting than it would have been if Labour had not been overspending.

Hmm.

I possibly agree that we should live within our means, but at an international level it may not be the economically wisest course of action - it's better to keep the money going round. I personally think that there are many more important things than deficit reduction and, if that reduction really is vital, then the population as a whole should lose a percentage of income, not just the poorest 30%. Come on, Shiney Dave - make some sacrifices yourself and get your mates to do the same. Or do you really think that if you're rich then you get special dispensation to keep all your money but if you're poor you should be shafted?

I also don't necessarily think that Labour overspent and that the recession would have been better under a Tory government, given that Labour managed a surplus for several years, which arguably cushioned the effects of the recession, and the economy was growing under Labour pre-2010 election; until the first Coalition budget, after which it flatlined. The Tories only managed a surplus once in 18 years and their debt levels were significantly higher than Labour's pre global economic crisis. The Tories also relied on selling off national assets for temporary financial boosts (as they are doing now) so they don't inspire me with confidence that they can run a national economy.

Labour's problem was that they didn't fight the lies being told, such as that stupid letter when they were left a similar one in 1997. You'd almost think they wanted the Tories to win so they would really beggar up the economy so Labour would walk it in 2020 and the Tories would be out for a generation.

But didn't Labour borrow the most, at the end of their reign, to cover the cost of bailing out the banks?

Given the Conservative's economic record 1979-1997, it's very, very likely that they would have hat to borrow far more. Labour's surpluses gave a bit of a cushion to the later years, but is there any evidence that the Tories would magically have created a running surplus pre 2007 (as Labour did) when they'd only managed one during their earlier terms. Despite the boosts of selling off nationalised companies - an advantage Labour obviously didn't have, whatever Blair's views on privatisation.

a running surplus pre 2007 (as Labour did)

No Labour did not. They ran a deficit every year from 2001.

Labour ran a budget surplus for the 4 years 1999 to 2002 inclusive. Also, inherited public sector spending 1996-1997 was 40% GDP: Labour spent less than this every year until 2006, including at least one year where public spending was down to well under 35% (sources vary, some even saying public spending stayed below 40% until 2008). All this was achieved while making a huge start on renewing great swathes of infrastructure - schools, hospitals etc. No more leaky roofs.

According to official figures Labour ran a surplus for 3 years, not 4. They did reduce public sector spending to 34.5% of GDP in 2000-01, the last year for which they were following the Conservative's spending plans. The following year, 2001-02, public sector spending jumped to around 38% of GDP as Gordon Brown began his unaffordable splurge. This is when they started spending huge amounts on infrastructure. Public sector spending rose above 40% of GDP in 2004/05 and stayed there. During this period every single budget presented by Labour showed a deficit but also showed that the deficit would be reduced in the following years. Every year the deficit reduction plan moved out by a year.

Corbyn is one sole voice in the whole of Westminster's operation actually speaking the truth.

The People are sick and maxed-out from hearing the same shite about stealing from the poor austerity and "living within our means" (if you are poor) and Westminster's deficit caused by the banks.

The mealy mouthed, surface-slick, in bed with bankers MPs that we have had to endure for decades now need to step back to hear The People.

The Labour 1997 manifesto said:

We are pledged not to raise the basic or top rates of income tax throughout the next Parliament

We renew our pledge not to extend VAT to food, children's clothes, books and newspapers and public transport fares

For the next two years Labour will work within the departmental ceilings for spending already announced.

They ran a surplus because they followed Conservative spending policies. This is because no-one trusted them economically following the late 70's spending debacle requiring IMF emergency loans, so they needed to promise not to overspend or raise taxation.

As soon as they were able, they began spending excessively again. There is no evidence the Conservatives would have done similar.

"Corbyn is the only candidate sticking to the line that the banks were to blame and he is reaping the benefit. Not least because he is absolutely right."

Corbyn both in denial and trying to rewrite history and fooling so many ‘the faithful’ is a larf; as if the man who made the mistakes has owned up to them, what does it take for and Labour MP to get the leaders memos?

As caroldecker sez, Labour/Brown in 1997 was only trusted on the economy as they promised to adopt the Conservative budgets looking to balance the UK’s books by 2001/2.

If Labour went into any budget SURPLUS it was because soon after coming to power, WITHOUT warning the voters prior to the 1997 election, Brown sold over 40% of our gold, raided Private Pensions (to near Final Salary destruction) and started moving up Home Stamp Tax from a Flat 1% rate – to catch many a family out in the years to come.

Memo; to Jeza Corbyn from Gordon Brown.

April 2011; Gordon Brown:I made ‘big mistake’ on banks before financial crisis
metro.co.uk/2011/04/11/gordon-brown-i-made-big-mistake-on-banks-before-financial-crisis-650630/

”Gordon Brown has admitted making a ‘big mistake’ in regulating Britain’s banks before the country was plunged into recession by the 2008 financial crisis, as current chancellor George Osborne prepares to hand power back to the Bank of England.”

”At a conference in the US on Saturday, the former prime minister said during a speech to the Institute for New Economic Thinking that Labour should have done more to rein in the banks before the crisis hit.”

‘We set up the Financial Services Authority [the City regulator] believing the problem would come from an individual institution. That was a big mistake. We did not understand just how entangled things were,’ he stated.

‘We did not understand how risk was spread across the system, we did not understand the entanglements of different institutions and we did not understand, even though we talked about it, just how global things were.’So we created a monitoring system which looked at individual institutions. That was the big mistake.’

”Attendees at the conference in New Hampshire also heard Mr Brown point out that he wasn’t alone in making mistakes at the time: ‘I have got to accept my responsibility and I do, and I have been very open about saying we made mistakes on that.”

December 2011; Labour's lax regulation of the City contributed to RBS collapse – watchdog

FSA says Labour leadership had encouraged it to take a 'light touch' on banks and must take share of blame for financial crisis
www.theguardian.com/business/2011/dec/12/labour-regulations-city-rbs-collapse

”Labour's lax regulation of the City contributed to the collapse of Royal Bank of Scotland and allowed the former bosses of the bank, including Sir Fred Goodwin, to walk away without being disciplined, according to the Financial Services Authority.”

”In a long-awaited report into the RBS scandal, Lord Turner, chairman of the FSA, said the regulator had been encouraged to take a "light touch" by Labour and that its creator, Gordon Brown, had left it with a "structural flaw".

”Turner, who said the public had a right to be "absolutely furious" about the banking crisis, cited demands by Tony Blair, Brown and Ed Balls that the financial district be allowed to be competitive.”

• So Labour/Brown encouraged the bank lending boom via the new FSA Financial Regulator they created, which saw UK Mortgage Lending going up from £21 bil a year in 1997 to £115 bil a year by September 2007 when the financial crash began.

• UK Home prices over that time went from an average £73,000 in 1997 to £232,000 by early 2008.

Labour did not create the western financial collapse, but they contributed to the extent of ours, causing the UK taxpayer to fund nationalise banks (when other countries never had to) and delay the economic/lending recovery.

Labour/Brown used the huge increase in tax receipts from the financial bubble they helped create, to massively increase annual UK government expenditure, far more than anywhere else in Europe.

But when the financial bubble/tax receipts burst and totally dried up by 2008, when the UK was to then lose around 7% of GDP output and many private sector jobs – incompetent Labour not only kept that increased spending going on the previous unreformed, wasteful and bloated government - but also tried to mask private sector job loses by hiring far more public sector workers that could only be funded by more taxes or government debt.

That in 2010 = a £153 billion UK government annual budget deficit/overspend they passed to the Conservative led coalition, with NO PLANS in place to address it OR help those struggling since 2008 when ‘real’ (inflation adjusted) take home salary incomes began falling – so to fund this bloated State Labour formed, only ever more tax hikes were to follow – as apparently, any cuts to the spending monster Brownenomics/ socialism created, would be called austerity (to justify those tax rises) and STILL IS.

Labour over 13-years, with huge majorities in parliament showed that they not only didn’t understand how interconnected the global financial system was, they didn’t understand how to construct a sustainable economy – as the one they ‘created’ was on debt/spending sand, and was to structurally fail on the first major recession that came along.

Corbyn is a 1970’s ‘throwback’ to a era (read error) where over that decade Manufacturing fell from around 29% of our economy to around 23% when sod all else - nationalising industries failed despite huge amounts of taxpayers money being thrown at it - and Labour in 1979 passed on to the Conservatives around 20% inflation and interest rates and an economically unsustainable;

Income Tax Basic Rate; 32%.
Income Tax Higher Rate; up to 83%.
Tax on unearned income; over 90%.
Corporation Tax; 50%.

These were what the hard left want to tell you were ‘the pre Thatcher good old days’, despite the likes of Germany and Japan without any of the above negative conditions, beginning to steal our industrial market share – and the trade unions thought that they ran the country no matter who was in power.
en.wikipedia.org/wiki/Winter_of_Discontent

”The Winter of Discontent refers to the winter of 1978–79 in the United Kingdom, during which there were widespread strikes by public sector trade unions demanding larger pay rises, following the ongoing pay caps of the Labour Party government led by James Callaghan against Trades Union Congress opposition to control inflation, during the coldest winter for 16 years.”

Spot the trend, Labour of whatever ‘wing’ historical feck ups, Conservatives always needed to sort it out? lol

In 2007, the Conservatives pledged to match Labour's spending, including on public services.
news.bbc.co.uk/1/hi/uk_politics/6975536.stm
www.telegraph.co.uk/news/uknews/1562023/Tories-vow-to-match-Labour-spending.html

Osborne is also on record saying that Labour's banking regulations were too tough.

In other words, please elect Corbyn, as come the General Election history shows how every Corbynomics policy has failed.

And more recently, for anyone who followed Venezuela's socialist/State controlled experiment that left the country on its knees, this was what Jeza said;

"Thanks, Hugo Chavez, for showing that the poor matter and wealth can be shared. He made a massive contribution to Venezuela and a very wide world"

Corbynomics, as in Venezuela and Greece, only helps the poor over the short term, before the money runs out, and leaves a much longer term problem for those same poorest in society.

AlltheprettySeahorses .... When Osborne pledged to match Labour's the 2% increases it was in early September 2007, BEFORE the financial crash began, clearly the main economic/budget pain was 2008/9 when the UK lost nearly 7% of GDP output and many private sector jobs funding the fat State were lost - so THAT was the time to curb the State to help the masses with tax cuts, like other countries did.

As for Osbourne "on record saying that Labour's banking regulations were too tight" apart from the fact Labour were running the country not Osbourne - please show it as there were many saying that ALL REGULATIONS put in place by Brown's new FSA were killing the economy e.g. 1 million manufacturing jobs lost in the 7-years to 2005 - starting with THIS lot.
www.dailymail.co.uk/news/article-1214001/The-cost-quango-Britain-hits-170bn--seven-fold-rise-Labour-came-power.html

(July 2005) ”What Blair really thinks about the FSA”
www.telegraph.co.uk/finance/2918368/What-Blair-really-thinks-about-the-FSA.html

“Tony Blair is gripped by a desire to slash red tape - or so he claimed in a speech last month. That address attracted notice principally for Tony Blair's surprising and controversial statement that the Financial Services Authority is "seen as hugely inhibiting of efficient business" - but his assertions roamed wider than that.”

“No one in any business - be it vast or tiny - needs to be told that the burden of regulation has increased since Labour came to power in 1997. The British Chambers of Commerce estimates that the cost for business of coping with red tape from Whitehall and Brussels will be £39bn this year - four times as much as in 1997.”

“Of course the bureaucrats of Brussels are only half of the problem. At the end of May the prime minister delivered an embarrassing rebuke to the City watchdog, the FSA, which was set up by the new Labour Government in 1997.”

“Blair said: "Something is seriously awry when … the Financial Services Authority that was established to provide clear guidelines and rules for the financial services sector and to protect the consumer against the fraudulent, is seen as hugely inhibiting of efficient business by perfectly respectable companies - that have never defrauded anyone."

So for all the Labour apparatchiks/apologists that KEEP saying that Labour had nothing to do with the banking crisis, do you NOW believe Mr Brown when apologising for messing with a global banking/financially regulated markets, that he didn't understand?????

• That the FSA he formed to take sole regulatory control away from the BoE, screwed the financial pooch by relaxing financial controls, when UK bank balance sheet/leverage lending to UK businesses and consumers was growing very fast (see just mortgage lending growth further above) - so the worst possible time to go regulatory 'lite'?

• That the FSA did what all fat, inefficient governments do, looked to justify their existence by regulating what didn't need to be and costing businesses money and jobs?

IsIt -I was replying to CarolDecker.

But yeah, if Osborne was going to match Labour's spending, then how would he have been in a different position at the start of the global crash? I have no confidence in his (mis)management of the economy back then either, given that the UK was well out of recession in May 2010 and was growing reasonably strongly again but went straight-ish back into a triple dip under Coalition fiscal policy?

I shall be voting for Jeremy Corbyn for labour leader, and really hope he wins.

pretty

We never went into recession in 2010 or since, let alone a double or triple dip.

Also, on regulation, and I think we have discussed this on another thread. There was too much of the wrong regulation under Labour. It is perfectly possible to reduce the amount of regulation and also improve the risk coverage. The only specific example of regulation that the Conservatives wanted to cut was Sox, which has generally been agreed to be useless and expensive.

Here is a historical chart of the UK budget deficit from 1979-2012:

www.theguardian.com/news/datablog/2010/oct/18/deficit-debt-government-borrowing-data

Note: Running a deficit is the norm.

carol-

We never went into recession in 2010 or since, let alone a double or triple dip.

We have never fully recovered from the 2007/8 recession. Thanks to austerity measures, this has been the longest recovery in over a hundred years.

"It is without historical precedent. Fraser pointed me to a series published by the Bank of England which provides data on real GDP back to 1700, and guess what? He was right. It is now clear that George Osborne is responsible for the worst recovery in three hundred years of recorded history."

www.independent.co.uk/voices/comment/britain-has-taken-longer-to-recover-from-recession-than-at-any-time-since-the-south-sea-bubble-9645218.html

If you mean we are not back to where we may have been had there not been a recession, then maybe blame the person who caused that recession (GB) or the Lib Dems who tied the Conservatives hands for 5 years.
Running a deficit is the norm, but it shouldn't be and not at the level we are running at now.

Pardon?? "Blame the person who caused the recession (GB)"
Right, once again,
Gordon Brown, one person, he alone caused the global financial crisis.

You lot make me need to go smoke glue.

To isitme, respect where respect is due. You must be exhausted.
But sorry the people aren't buying it anymore.