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

GB didn't regulate banking right, but do we really think the Conservatives would have? Did they argue for more or different regulation? Thought it was the opposite.

The Conservatives also promised to match many of GB's spending plans.

they argue for more or different regulation

They argued for less and different.

The Conservatives also promised to match many of GB's spending plans

That, in my view, was a mistake. They were attempting to copy Blair and Brown's tactic in 1997 when he dealt with the electorate's concern that Labour was still a tax and spend party by promising to match Conservative budget plans for the first few years following the election. Cameron and Osborne believed that the electorate was concerned about Conservative plans for cuts so promised to match Labour's spending plans. The Conservatives believed that Labour was spending too much but thought that saying so would reduce their chances of winning the election.

prh47bridge ....The Conservative pledge PRE late 2007 financial crash to match the then 2% real increase in government spending at the (benefit of hindsight) HEIGHT of the financial/economic boom, no doubt with overly optimistic tax receipt projections from the UK Treasury controlled by Brown's ministers, IMO was nothing like the pledge Brown made in 1997.

Labour by 1979 was known as an anti business tax high, spend badly, party - so Brown did indeed adopt Conservative budgets in 1997 to pay down the budget deficit by 2001/2 - but then when elected 'taxed badly' e.g. raiding private pensions and sold around half our gold at a 20-year low price.

Osborne would have appeared churlish in early 2007 NOT matching Brown's spending pre financial/economic crash when the world was booming, interest rates/inflation were coming down, especially if memory serves, Brown had been making 5% real increases in public spending before then, so there was already a 'cut'.

Furthermore for many years the governments Private Finance Initiative (PFI) spending using 25 -year debt to spend on Public Sector using private sector contracts, was 'OFF UK Plc's balance sheet', similar to tactics used by dodgy hedge Funds and banks using the Cayman Isles - and wasn't 'consolidated' for many years, which I suspect is why some figures show UK surpluses in the early Labour years.

My point being, what HM Opposition Parties and shadow chancellors could see in early 2007, was unlikely to be the true state of the State.

Duckdeamon .... re your post;

"A few Government publications (both Labour and Conservative administrations) highlighted the level of individuals' debt in the UK, but have proposed few policies to address this. Lots of policies seem to transfer economic risk from the private sector and state to individuals."

In 1997 Household Debt was at 97% of income, and trended higher every year until the 1 qtr of 2008, when it got to 168%.

No doubt Bank Mortgage lending multiplying from an annual £21 bil to £115 bil over a similar period was a major contributor of that.

People were saving more in 1997 as that was what the Conservatives encourage, the pension raid by Brown on what WAS the best funded private pension provision in Europe, began the transfer of saving in pensions and other products to the BTL property market as demand grew and interest rates came down. IMO

^"Most of the welfare bill is for pensioners' benefits, but few politicians propose to reduce those, eg stopping non means tested benefits for wealthy pensioners, because there are so many older voters.

Around 60% is currently spent on the State pensions, which are UNFUNDED, so get drawn down out of annual government budgets when due, but looking at the pee poor increases under Labour (was it a 72p rise in 2000?) the SIZE of the payments is likely to be due to MORE people reaching pension age and also not croaking so early.

“Wealthy pensioners” is subjective, as many might be asset rich, cash poor, and as Brown’s private pension raid CLOSED most Private Sector Final Salary schemes and took to-date around £260 billion out of private pension provisions, that typical joined-up-policy-thinking of taxing now, feck the future, means ‘pensioner envy’ may be a thing of the past as MORE will now rely on the State.

Duckdeamon .. re your "GB didn't regulate banking right, but do we really think the Conservatives would have?"

Clearly this was a Brown 'thang', as he decided for some unknown reason, that the steady de-regulation from the early 1990's of U.S. banks from the Glass-Steagall Act of 1933, put in place after the Wall Street Crash - that separated retail banking from investment banking - meant that the UK had to somehow lighten regulation here.

The Conservatives to my knowledge had no plans to take sole Bank Regulation & Supervision away from the Bank of England and form, as Brown did, a regulatory tripartite of the UK Treasury, the (new) Financial Services Authority and the BoE - where Brown controlled two of the three.

“Repeal of U.S. Glass-Steagall Act (1933) Caused the (2008) Financial Crisis”
www.usnews.com/opinion/blogs/economic-intelligence/2012/08/27/repeal-of-glass-steagall-caused-the-financial-crisis

”In fact, the financial crisis might not have happened at all but for the 1999 repeal of the Glass-Steagall law that separated commercial and investment banking for seven decades. If there is any hope of avoiding another meltdown, it's critical to understand why Glass-Steagall repeal helped to cause the crisis.”

Every chancellor wants a boom economy, there were no national economic emergencies in 1997 as there were in 1979 (and 2010), so this was the Brown/Balls cunning plan to fund their welfare state plans, having been out of power for 18-years.

P.S. What we do know is that Brown used to visit a key architect of U.S. Banking deregulation, the U.S. Federal Reserve Chairman (1987 to 2006) Alan Greenspan, BEFORE Labour came to power - and clearly kept close while loosening bank regulation here.

Sept 2002; ”UK cements US financial ties”
news.bbc.co.uk/1/hi/business/2279871.stm

”US central bank chief Alan Greenspan has praised the UK financial system and its guardian, Chancellor Gordon Brown, on a two-day visit to the UK during which he is scheduled to pick up an honorary knighthood.”

”The Federal Reserve chairman is to be awarded the title of Knight of the British Empire at a ceremony on Thursday in Balmoral castle, one of the Queen's residences.”

Maybe, just maybe, the U.S. back then had two English poodles, ones arse ‘owned’ by Bush, the other’s arse, owned by Greenspan.

Duck-

Banking deregulation has been going on for three decades now. The whole Capitalist class is to blame:

www.pbs.org/wgbh/pages/frontline/oral-history/financial-crisis/tags/deregulation/
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A Short History of Financial Deregulation in the United States

www.cepr.net/documents/publications/dereg-timeline-2009-07.pdf

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Well, on both sides of the Atlantic in the 1980s and 1990s, deregulation became the name of the game; Alan Greenspan was almost deified; and the Greenspan doctrine – that financial engineering spread and virtually eliminated risk – was widely accepted.

www.theguardian.com/business/2012/may/06/shout-rooftops-bank-deregulation-leads-to-disaster

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25 People to Blame for the Financial Crisis

content.time.com/time/specials/packages/article/0,28804,1877351_1877350_1877322,00.html

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www.telegraph.co.uk/news/uknews/1560100/Tories-plan-14bn-cuts-to-red-tape.html

In the UK of the 1970's to 1980's the 'deregulation' in the capital markets was a move from the UK stock market Jobber/Broker separation, to price making to large global institutional clients from highly capitalized Investment Bank dealing desks across 3-time zones, giving fund manager client the 24-hour service they required.

Nothing toxic there, if bond, stocks, currency, commodity etc markets crashed in Tokyo time, fund managers didn't want to wait until 9a.m. London time to transact/hedge their risk.

In the UK retail banking market from that time it meant a citizen didn't need to be rich to get access to bank loans.

In the UK and elsewhere from 1997, Anglo Saxon bank leveraging up of balance sheets grew from around x 30 times, to some x 50 times, as banks indeed believed their ability to hedge risk made them bullet proof.

Gordon Brown even lectured other European leaders on how clever it was to 'let the banks go free', but few in Europe, Canada, or the Far East totally followed his advice - which is why their largest banks didn't need nationalisation, in some countries little central bank help was needed for banks, if at all.

investing in infrastructure is not a crime - we massively need this.

when people say oh labour spent they make it sound like they went on a jolly rather than trying to invest in public services that had been run down and did things like build schools and repair and rebuild hospitals etc. we need schools, we need our hospitals to be brought up to date - these aren't luxury items and the UK, a relatively wealthy nation, spending money some money on repairing infrastructure during a relatively wealthy period (re: after a few years of running a surplus) is hardly global recession causing.

i also can't buy that it made the recession last longer or hit harder - how much worse off would public services be now if they hadn't had some investment before being decimated again?

for a supposed modern country we have shit trains, shit roads, poor flood defenses, some towns are full of rubbish because even rubbish collections don't meet population needs in crowded areas etc. sooner or later we have to spend money on infrastructure and investment on our systems and when we do we create jobs, trade and industry.

All the 'investment' spending in schools and hospitals was funded under Labour by PPI and not recorded as government spending. His extra spending on the NHS was on salaries, so not investment.

Agreed, massive NHS spending by Labour and ended up with tens of thousands less hospital beds in 2010 than 1997, despite having the largest arrival of Europeans etc since 1066.

There is massive investment in infrastructure now in roads and rail and flood defences DESPITE the huge budget deficit inherited.

Someone please remind me, what were the large projects under Labour in infrastructure (especially to narrow the North-South divide) over 13-years, when they had spare tens of £billions from the windfall of a financial bubble, coming out of their yazoo?

largest arrival of europeans since 1066? so like an 'invasion' then you mean to imply? talk about leading language

God give me strength, "leading language", no doubt like 'swarm' or 'marauding' eh?

Anyone under a Labour administration daring to mention immigration as the numbers rose through the 2000s were called 'racist', even on website like the Daily Mail their lawyers closed down threads deemed provocative for mentioning the 'i' word.

It just shows that you lot have not learned your lesson; screw the indigenous poor of whatever race affected, we'd rather be p.c.

??? whatever dear.

Ok sweetie....go put implied words in someone elses mouth.

How exactly did Gordon Brown cause Leaman brothers to go bankrupt, cause the US Treasury to divide not to bail them out.
This is clearly nonsense

For around the 20th time, no one has said that Brown was responsible for the U.S. financial crash and Lehman Bros demise due to its exposure the the Sub Prime Mortgage market, via its role as a U.S. mortgage backed bonds market maker - however as mentioned elsewhere (on page 1 etc) with qualified links, he was responsible for the UK going regulation lite via his newly formed FSA and the growth in our banking exposure, and he admitted it.