I don't claim any great understanding of economics but how was it that labour made all these plans for grants, schemes and so an when there was no blooody money?

[moondog]

Eh?

Because they wanted people (pensioners, middle income families etc) to vote for them.

Everyone was so impressed by what they could have (tax credits, winter fuel payments, free bus passes etc) that they forgot to check whether we could afford them.

Do yo really reckon it was as simple as that?
(serious question)

I think they were hoping that more money would be forthcoming (economic growth?) and it would all be alright in the end

Just seems a really reckless and amateur way to run the show.

Some of it was aimed to get people back to work like free nursery places and tax credits
they couldn't predict the global financial crisis

Stranger things have happened than governments buying a few votes. Also, Labour had a perennial habit of being a little too optimistic about growth forecasts, giving the impression that the good times would roll on for ever. Looking back, the credit crunch/banking crisis/global recession or whatever you like to call it was hovering, waiting to happen... but, like nearly everyone else, they didn't predict it or (worse) prepare for any kind of 'rainy day'.

It probably wasn't that simple, but I do think that was behind a lot of it.

Of course they couldn't have predicted the economic crisis, but the economy does run in cycles so it was fairly obvious that we couldn't sustain growth forever.

Arrogance.

Also 'ideology' played a big part. Crushing big government ideology to keep us all fearful and dependent. On the one hand, lavish public spending and borrowing money to give tax credits, child trust funds and winter fuel payments to people who didn't need them. (Lollipops!!! Come and get your lollipops!!!!) And just to get us to run into the Childcatcher's wagon a little faster they said they'll also protect us from the bogeymen with liberty-reducing proposals like 90 days detention without trial, ID card schemes and DNA databases. And we very nearly bloody swallowed it.

Government borrowing went up to record levels at a time of economic growth when the government should have been saving. People like to blame the banks but the way debt was rising we were going to get in trouble anyway (cross ref Greece).

Labour relied far too much on economic growth (as said above - using optimistic forecasts) when planning spending. They forgot the basics of saving when times are good so you have money to spend when times are bad.

So bow we're in a position where times are bad but we have nothing to fall back on. If labour had won the election I'm afraid the axe would still be swinging.

There was a fair bit of UK exceptionalism at play, I think. You can still see it in the endless "Britain isn't like Greece!" articles. The UK is lucky to have the long-maturing debt that it has. It's not a given.

agree with domesticsluttery, it was another of their cynical political ploys, at which they are the masters

I think Gordon Brown genuinely believed that he had "abolished boom and bust economics" and simply couldn't conceive that the good times would ever end. In saying that, he massively overspent even without the recession buggering everything up.

Jesus, has no-one here ever read Keynes (Riven excepted) ? There are differing opinions (there always are in economics), but counter cyclical spending is a perfectly respectable response to the most significant world economic downturn since the 1930s.

Vesela, can I recommend that you read 'This Time is Different' which is an excellent book written by two relatively right wing economists which shows very comprehensively exactly why Britain is NOT like Greece.

I have heard of Keynes but he suggest saving money when the good times are rolling and then a huge spending spree as the economy contracts. Unfortunately we have had one big massive spending spree for the past 12 yrs.

Takver What are you talking about?

Everyone acknowledges that public spending will increase in recessions. Counter-cyclical policy is about spending in the bad times, yes, but also saving in the good times so you can afford it.

Doing one without the other is a recipe for disaster, as Labour showed.

The difference between Keynes and Hayek is much more about the balance between the roles of fiscal and monetary policy than about whether policy should be counter-cyclical.

Well, its quite a mixed story if you look at the UK national debt - no where near as simplistic as is being suggested here.

The IFS give national debt as a % of GDP from 1900 up to 2000 in figure 3 here. The ONS has debt as a % of GDP from 97 here. Looking at it it would seem that debt fell fairly steadily as a % of GDP from the war until around 1980, then plateaued. It then fell steadily from 1997 until 2003, when it rose again - but only to the level of around 1998 - then rose dramatically with the onset of the financial crisis.

So it would appear that from 2003, Labour moved back to the level of debt as a % of GDP that had been maintained by the Conservatives in the 1980s.

Should point out that I am no fan of Gordon Brown - but I do think that there is a somewhat hysterical anti-deficit movement at the moment. I keep linking to Paul Krugman's blog, but he does have lots of interesting things to say on the subject. Anyway, must cook dinner, back later, flame me as you will

Comparing Brown to that great man Keynes is going it some. Brown and Darling always reminded me more of Del Boy and that plonker Rodney

Quite agree with Takver. And Krugman.

Takver Gordon Brown did well when he was sticking to Ken Clarke's spending plans in Labour's first term.

After the 2001 election he went crazy with his spending. We were running a deficit from 2003 to 2007 when we could easily have been running a surplus. We had a huge structural deficit before the credit crunch.

There was almost no welfare reform in the years when jobs were plentiful and the pain could have been easily mitigated. Now sadly it must be done when jobs are scarce.

I agree the Tories don't always have a perfect record on keeping a control on the national debt - that doesn't mean that Labour shouldn't be criticized for it though!

Takver - thanks for the recommendation.

Rachel Reeves in the Guardian a couple of weeks ago just batted away the issue of the deficit size, though:

"In other words, the amount of debt the UK bears in relation to the size of its economy is simply much smaller in the UK than Greece. Of course, this fact alone does not give a complete picture, as it is the budget deficit that gives us the all important information as to which direction the national debt is travelling. But there is no getting away from the fact that the UK is a long way off being close to Greece in terms of its national debt."

she said it herself - "all important."

It's this feeling that the UK can continue to do what it's doing - that it's on angels' wings.

Krugman sometimes has some good things to say (as someone said on the other threads, re. the Bush tax cuts. I remember him speaking at the LSE on that subject - he was excellent).

Tavker yes, I have read a little bit of Keynes (as part of my Economics degree...)