Why the government is lying

[OhBuggerandArse]

Good blog post by Johann Hari here, on the myth that the cuts are needed because of our debt.

Here's a taster, but it's worth reading the lot, it's not long:

Let?s start with a fact that should be on billboards across the land. As a proportion of GDP, Britain?s national debt has been higher than it is now for 200 of the past 250 years. Read that sentence again. Check it on any graph by any historian. Since 1750, there have only been two brief 30-year periods when our debt has been lower than it is now. If we are ?bust? today, as George Osborne has claimed, then we have almost always been bust. We were bust when we pioneered the Industrial Revolution. We were bust when we ruled a quarter of the world. We were bust when we beat the Nazis. We were bust when we built the NHS. Or is it George Osborne?s economics that are bust?

You are quite right - Tory councils are not having to make as many cuts as Labour ones.

But it is not because Labour ones want to make a political point, it is because Pickles has very carefully changed the way councils receive central funding. Basically the more tory voters in a county, the more money the council gets.

www.nlgn.org.uk/public/2010/poorest-areas-hit-hardest-by-finance-settlement/

Of all the things this government is doing this is perhaps the most obscene.

Change the formula so that labour councils have to make more cuts than tory ones. So yes Richmond on Thames loses almost nothing while Liverpool, Manchester and Birmingham are hammered.

Or to put it simply - Labour councils are notorious for wasting money and will now have to justify every penny.

oh is that what I meant. it all makes perfect sense now.

tempted to tell you to Orff (humour alert - hope people get it)

It isn't funny though. Deliberately taking money from more deprived areas in the midst of a recession caused by rich bankers. Incredibly divisive. If this carries on we will be back to the riots of the Thatcher years.

Paul88 - hi

I lived in a Labour controlled borogh for years ( Lambeth ). I bought my first property ( years ago ) on the Streatham/Wandsworth Borders - unfortunately for me, my house came under Lambeth Council whilst the houses opposite came under Wandworth. I paid around £200 a yr more in council tax than they did, even though we shared the same street and facilities. What shall we blame that on? I'm afraid it's a fact that Labour controlled councils are badly run ( in the main ) and that Tories are known for being more efficient.

& What statistics you quote will depend on where you stand politically - Migrant watch for example claim that Migrants cost the economy 100 million pounds a year ( migrant watch UK, 2006 ) and as the UK opened its Borders to migrants from eight Eastern European countries back in 2004 I'd say they were about right.

But let's just blame the Banks for everything - so much easier.

Blame the banks? I'd say £850 billion from the public purse to bail out the banks is kind of a large public spend, wouldn't you? Or doesn't that count? Ah, yes, we'll be making returns on that money, won't we? If you believe that.. ... .. .. ...

And we're in debt because we gave a lot of money to the poor? Utterly risible. There'll be a hell of a lot more money being doled out in JSA over the coming year.

White collar crime costs this country £60 billion a year - only a 5% detection rate - but instead, we focus on the few who rip off the benefits system. It's ludicrous. I'm certain the benefits system needs a deep review and an overhaul but not slash and burn.

It's only time that will tell if Osborne has it right or wrong - I mean, how the coalition's policies will be in full effect by 2013 and there's only so long they can keep blaming the previous government after their policies have been fully implemented.

And I guess eminent economists like Joseph Stiglitz are also talking rubbish too unless they concur with policies espoused by people like Osbourne

It was more like £80bn that bailed out the banks in the form of buying shares. Other money was made available to borrow in the form of short term loans.... that is back in the public purse.

Oh only £80 billion? Would love to know where you get your figures from Chili.

Cos there's lots painting a different picture

and here

Why do Tories consistently underplay the enormous role the banks have in this global mess? Why? Because it's very convenient politically to blame the previous government for its entirety. Not that the previous government is blameless. No government is.

Why do Tories consistently underplay the enormous role the banks have in this global mess? Why? Because it's very convenient politically to blame the previous government for its entirety. Not that the previous government is blameless. No government is.

Precisely. And tribal Tory supporters/New Labour haters are more than happy to jump on the bandwagon. What better way to prop up the current government and bash the opposition?

Here for example.

The commitments include buying £76bn of shares in Royal Bank of Scotland and the Lloyds Banking Group; indemnifying the Bank of England against losses incurred in providing more than £200bn of liquidity support; guaranteeing up to £250bn of wholesale borrowing by banks to strengthen liquidity; providing £40bn of loans and other funding to Bradford & Bingley and the Financial Services Compensation Scheme; and insurance cover of over £280bn for bank assets

£76bn was spent on buying shares but the rest was to guarantee borrowing, offer loans and insurance cover. That's not quite the same thing as 'spending'. The total comes to £850bn but the National Debt over that time it didn't jump up by £850bn.

The banks were almost wholly responsible for the credit crunch, triggering the crisis and the subsequent recession. Few disagree with that. But when the government of the day believes that there is no such thing as 'bust', spends as if recession is a thing of the past and relies on consumer debt and an inflated public sector to generate growth then you have to say that was an accident waiting to happen.

But Labour also had plans for cuts. So it's not true to say they didn't believe in bust.

Agree with ttosca and WinkyWinkola, it was not all Labour's fault due to their public expenditure. The crisis was due to the banking crisis and the collapse of Lehmans and the shocks that that caused to the world's financial system.

If you believe it was due to public expenditure, do you also believe that Iceland's and Ireland's collapses were due to public expenditure?

'The IMF calls the collapse of the banks the biggest banking failure in history relative to the size of an economy. In 2007 Iceland?s three main banks made loans equivalent to about nine times the size of the booming economy, up from about 200% of GDP after privatisation in 2003 (see chart 1).'

The Daily Telegraph again gives good analysis.

'Big though the IMF estimate of the size of public sector support for the banks is, it actually understates its true, much bigger scale, for the main prop to the banking system is not through asset protection and recapitalisations, but funding. Markets are still essentially closed to many banks for funding of much more than a few months. The gap is being filled by the Bank of England and the Government, which are providing alternative liquidity. Throw this in, and the grand total of public money is somewhere in the region of £1.3 trillion, or not far off the the UK?s annual GDP.'

The comments for this article also show that most Telegraph readers don't buy the argument that it was due to Labour's public expenditure.

blogs.telegraph.co.uk/finance/jeremywarner/100001204/banking-crisis-has-cost-uk-taxpayers-more-than-a-quarter-of-gdp/

If the overall cost to the public is not so great, if we are going to make a profit from it all, then why are the cuts the worst we have seen since the 1930s? Are they then ideological?

Sorry, but it is a fallacy that 'banks' alone caused the financial crisis. Irresponsible borrowing and irresponsible lending did. It takes two to tango. On top of this the last Labour government was throwing the good money after the bad on meaningless projects (ie GP contracts) rather than listening to the economists warning about the inevitable crash and a) adjusting the policy accordingly (including banking regulation), b) preparing the financial cushion to break the fall.

It is very convenient to blame the banks, but what about all the individuals and businesses who were cheating and lying on applications to borrow to get this house, car, holidays abroad and all the other 'necessities' of life?

Not the banks alone but they are responsible for a very large proportion of the crisis. And it will happen again due to the failure of the last AND this government to ensure regulation particularly as the banks still refuse to accept responsibility in any way.

Individuals too fail to recognise their personal levels of debt as a problem for both themselves and the country. Again, facilitated by retail banking.

The economy is smothered and will not grow under this government. The retail sector is complaining of reduced spend activity and further unemployment in this sector as well as the public sector is imminent.

It's very grim and I do not believe Osbourne has got a clue, frankly.

It is not "convenient" to blame the banks at all. Rather it is accurate and until regulations are in place, there is nothing to stop it happening again.

WinkyWinkola in this case can you please explain, how the bank's greed got them and the country in this mess, when others are innocent of any wrongdoing? Because I really have trouble understanding it.

Of course, Bemybebe.

Others are innocent of wrongdoing? I believe the general public of Britain is innocent really. The last government certainly is not innocent and nor is this current one.

There's plenty of factual information out there about the role of the banks in this global, economic crisis. Do not let anyone ever say to you that it is far too complex for commoners to understand so leave it to the professionals who messed up in the first place ordinary people to grasp. Let me show you:

Bit old but still very relevant although it claims the banks "didn't know" the effects of their lending - weirdly unprofessional otherwise imo!

Almost an acceptance of responsibility

Informative and interesting

And why reform is vital

And even Mervyn King as at the blame game. But heigh ho, he's not falling in with Osbourne's vision so he must be wrong, right?

I think that depends on your pov actually swc. Obviously, if you think Osbourne is the champion of economic recovery, then Hari is uncomfortable reading.

And this "bless his little cotton socks" attitude is exactly what I mean by those who say the economic crisis is beyond understanding by anyone apart from those economists and MN posters who believe deep public service cuts are the answer.

Sure he's a moron. That's why he's won awards because he has duped so many despite his being a moron. Pretty amazing for a moron.

And Mervyn King? Joseph Stiglitz? Ann Pettifor? Ah of course. All morons.

Begin swc. If you think it's drivel. And his opinions are pretty much the same as many economists. How then you can dismiss him as a blind pig finding an acorn is not appropriate but a great expression I'd not heard of before.

I'm not sure Amnesty Award is a pile of rubbish either.

Anyway, whatever Hari writes, we're all heading for a really bad time. Apart from Osbourne's chums and those consistently underperforming AND still receiving bonuses. The general public will have to just suck it up.