Did Labour f*** up the economy?

[Octavia74]

I am by no-means the most clued up of people with regard to political legacies. However I hear this said a lot without much justification.

Can I Ask how Labour f**d up the economy?

Wasn't it to do more with the financial crash?

Octavia74

The short answer is ‘not more to do’ with the financial crash, but what they did during the decade before, and how that also affected their options what to do about it, when the crash began.

As by ideologically growing the State far bigger than the Private Sector that supported it - supplemented by tax ‘windfalls’ from a Labour instructed Financial Services Authority deregulated high street bank lending boom, larger City profits and higher government borrowing in cash terms from 2001 – it was inherently unsustainable and was going to fall apart at the first recession, never mind the worst recession in over 80-years, as a financial recession triggered an economic one.

To give some scale of the National Debt side, when the previous recession hit in the early 1990’s the National Debt was around £190 billion, by 1997 it was £403 billion, but the annual government tax receipt/spending that always rises goes into a deficit during a recession (when tax receipts fall and unemployment etc claims rise), was budgeted (by the previous Conservative government) to balance by 2001.

And by the early 2000’s the UK government budget went into an annual budget SURPLUS, I assume with the extra proceeds of Labour’s early sale of around 40% of our gold (at a 20-year price low), the raid on private/company pensions, an increase in Home Stamp Tax from a 1997 Flat 1% rate over a first time buyers figure - and other tax rises we were to subject to over THEIR first several years – but on top of THAT extra tax revenue, we were going to into deficit spending AGAIN, with the government borrowing annually £30-42 billion a year, before the recession hit.

And so by the 2008/9 UK recession, when the UK annual budget deficit £100 billion (from a budget surplus in 2001), the National Debt would have been around double the 1997 £400 billion level, (especially with new Private Finance Initiative debt for years OFF government balance sheets) – and so by 2010 it was around £1 trillion, growing annually by the annual budget deficit figure – estimated to be £167 billion by the then Labour Chancellor Mr Darling when raising National Insurance to help pay it down.

March 2010; “Labour's planned National Insurance increase will cost jobs, Alistair Darling admits”

“In his evidence, Mr Darling defended his plans to increase national insurance, saying it was necessary to raise extra money to reduce Government borrowing, which will be £167 billion this year.”

Continued

So as the UK approached the 2010 General Election;

• With a now bloated UK State sucking in over half our GDP, with few if any over budget government departments even policy ‘fit for purpose’ even if ever more unreformed money was to be thrown at them.

• With UK bank lending that usually after a recession powers an economy out of the recession, now provided by fewer, often part nationalised or merged lenders, on the one hand being told off for lending too much during a 2000s boom, while on the other hand, with the resulting broken balance sheets, being told to lend more in a far riskier Western recession, preceding a near global banking collapse, few knew the consequences of which, was finally over.

• With Private Sector businesses struggling/closing and laying off hundreds of thousands of staff, with those workers still in work seeing a real terms fall in salaries from 2008.

With all the above, what did Labour do to help UK businesses and citizens financially and rebuild confidence, as OTHER countries who had NOT built such a huge state needing to be funded by ever increased taxes, LOWERED taxes?

Well OTHER THAN the promises of similar spending cuts. they had offered up the prospects of more tax rises than any other UK party, to be detailed AFTER the general election

March 2010; ”Alistair Darling: we will cut deeper than Margaret Thatcher”

”Alistair Darling admitted tonight that Labour's planned cuts in public spending will be "deeper and tougher" than Margaret Thatcher's in the 1980s, as the country's leading experts on tax and spending warned that Britain faces "two parliaments of pain" to repair the black hole in the state's finances.”

In conclusion; the doubt by some that Labour never caused a highly imbalanced, over taxed, higher deficit/debt economy, is because either through electoral cowardice, or being clueless how to fix their ideological dream State, once it was breaking down, the UK hardly saw a single Labour policy to FIX it – as it appears similar to every Labour manifesto from 1997 on, you’ll get the FULL higher tax and other painful policy details, AFTER the general election.

And really after 13-years, what did the people have to show for a few trillion spent/borrowed for the Conservatives to then build upon, other than fat State promises built on the proceeds of financial speculation, ever increasing company/citizen taxes, and reckless state borrowing/debt - well certainly not enough new homes, power stations, roads, train lines, provisions for a population explosion, or provisions for the baby boomers.

So instead of sustaining the unsustainable Labour built, the Conservatives from 2010 chose the medium to long term strategy to make more deficit cuts to current spending than Labour, but also lower taxes for businesses lacking investment/jobs confidence under Labour due to past high tax (and post 2010 policies to come), and citizens without the security of the government payroll, and who saw real earning fall from 2008, some reversals of Labour taxes, the freezing of tax rises e.g. Council Tax, and tax cuts taking a few million out of tax altogether.

The country model of the State bigger than the private sector that supports it will always be unsustainable, whether looking at the balanced budget in with over £400 bil National Debt in 2001, or the current £47 billion annual government budget deficit/overspend and near £1,900,000,000,000 (£1.9 trillion) of National Debt now – when if we o not carry on getting our finaces in order, the UK will be far less able to protect itself should a similar unforeseen financial or economic ‘event’, happen again.

The Tories voted alongside Labour to de-regulate the banks. The LibDems voted against.

Fancy seeing you here, Thea

There is more than one view on this. The 'truth' is far harder to discern.

Haha! Bet you're sorry you asked now, OP.

TestTubeTeen

Re your ” The Tories voted alongside Labour to de-regulate the banks. The LibDems voted against”

What absolute rubbish, read the two links within the my first paragraph.

Brown announced the new UK regulatory tripartite soon after coming into power in 1997 with a near 170 parliamentary majority (so he wouldn’t have lost, even IF Labour asked for a Westminster vote), taking sole regulatory powers away from the Bank of England, and included the UK Treasury (he controlled) - and also some newly formed Financial Services Authority (FSA), the Labour government also controlled.

The links show that that both Brown holds his hands up to deregulating the banks (blaming someone else for the consequences as Labour perpetually does e.g. the City for ‘making’ Labour do that and no doubt signing all those rubbish PFI deals) - and the now disbanded under Conservatives FSA - told us that the Labour put pressure on them to do so confirming it – so please explain how was THIS Labour in government f* up, also the Conservatives fault????

Lets not forget as Corbyn/McDonnell wants to borrow another £250 billion of taxpayer money to form a Government Investment Bank, what happens ‘when Labour does banks’ and puts their apparatchiks in charge. even when they 'did god'.

“The Co-op, Paul Flowers and Labour: what we know”

P.S. The Conservatives DID oppose Brown selling around 40% of the UK’s Gold Reserves, when the UK had far less gold reserves than any other large economy, especially at the lowest gold price after a 20-year downward trending market (around an average price of $270 an ounce) – right before gold went on an UPWARD price trend for over the next 10-years, hitting around $1,900 an ounce.

The BoE, other central banks, and the City also advised Brown not to sell our gold at that time, but he ignored them all, as I guess he had a new fat State to pay for.

PenguinsAreAce

Re your ” There is more than one view on this. The 'truth' is far harder to discern.”

As I believe the Labour Parliamentary majority for 13-years never went below a 60 parliamentary seat majority, please feel free to also try to blame the Conservatives for Labour’s economic, financial and social mistakes, but having inherited in 1997 from the Conservatives a low spend, lower tax economy, that similar to the 2015 election was the fastest growing economy in Europe (after the early 1990’s recession) - Labour were totally free for a decade to structurally ‘model’ the UK exactly how they ideologically wanted to, even helped (as UK taxes kept rising in THEIR first 7-years) by a mini global boom and falling global interest rates.

What was possibly the best decade in a century to build a better, more productive economy, and solve most of the social issues at the time, similar to their newly appointed FSA, they totes dropped the ball.

Even the shadow of a Chancellor McDonnell acknowledged Labour’s previous screw up, about a year before he caught a more severe dose of Labour ‘Cheque Book Religion’ – when he worked out he could ‘buy’ votes and a possible electoral victory.

“Labour promises 'iron discipline' to shore up fiscal credibility”

“Shadow chancellor John McDonnell tells Guardian restoring Labour’s economic reputation is “struggle of generation”

twofingerstoEverything

"Fancy seeing you here, Thea"

Well I left it a few days and thought hey, how can we be so rude and not answer a poster d-e-s-p-e-r-a-t-e-l-y seeking knowledge?

Labour made mistake which they would probably have got away with without the financial crisis, and which had been brewing not just since 1997 but since Thatcher.

The Cameron administration made things worse with too much austerity too soon.

Whole thing made worse by British business short-termism (encouraged by govt policy) which resulted in low capital investment and weak productivity.

Mistigri

Firstly I’d be happy to compare with you what Thatcher economically, structurally and socially inherited, what she eventually reformed e.g. penal taxation taking away the will to work/invest, and compare if the country was in a bigger poop in 1979 or 1997, but that’s a whole new debate.

Next while I think that the causes and potential severity of our banks problems could/should have been seen earlier and ‘something done about it’ (as which other large countries had to part nationalise their high street banks in 2007/8), personally I doubt that the New Labour restructuring of the UK public and private sector could have been reversed by the 2010 election, once Labour who had tried to get away from union ££ contributors in the early 2000s (by replacing them with private sector contributors including those in the City) – went back to the former to fund the 2010 election.

The fact is there was a sharp increase in UK government departmental spending from 2001 to 2007 from around £400 billion a year (in 2009 prices) to around £618 billion (I suspect excludes PFI debt as on local authorities’ balance sheets), as the government enlarged the ‘fixed costs’ of the State, via the public sector, welfare, benefits, tax credits etc _and began running £30-40 billion a year deficit borrowing through a period of economic expansion (when usually governments pay debt down).

So as ‘windfall’ tax revenues from the bank lending ‘bubble’ that at the time appeared to narrow the deficit spending risk, then burst during the credit crunch - this produced most of that huge £167 billion Labour projected budget deficit of £167 billion in 2010.

Tax receipts that evaporate on a financial crunch leading to a recession, wouldn’t have been firm on ‘just’ a bad recession, and hence the SIZE of our deficit in 2010, when if memory serves, as a comparison socialist, big State France who had not seen such a credit and government spending splurge, had around a Euro 60 billion budget deficit after their recession in 2010.

As to Cameron’s actions (or Labour’s back then saying they would half the deficit over a parliament their way) being too severe at the time, I believe at the time ‘experts’ like the IMF said a similar thing – but in my opinion few realised both how much the public vs private sector structure had changed and how unsustainable it was – as the 13-years of higher taxes (and regulation) was sucking the life out of the Private Sector as businesses struggling and shedding jobs through the recession, and citizens seeing real earning fall from 2008, all faced the prospects of HIGHER taxes under Labour after the 2010 election, apparently looking to sustain the social economy that Labour built for another parliament.

Now you might think that businesses without confidence in a government can be TAXED to investment and jobs growth and greater Productivity – but I’d suggest that if look at the definition link of how higher Productivity is achieve – I would suggest that HIGHER taxes, regulation, staff costs, and an even weaker currency importing inflation (on an international view of an unbalanced state sapping the life out of the private sector) - is the OPPOSITE way to achieve it, and so will fall further.