By Brian Barder
In the last few days the Tories have been discomfited, and Labour correspondingly heartened, by divisions within the Tory ranks over the National Health Service. These have highlighted the chasm which separates the party's Cameroon self-styled "progressives", with their "compassionate conservatism", from the old traditional Tory hard-liners of the stupid party (J S Mill's description). This bids fair to be an issue at the forthcoming general election and one which, carefully handled, should help Labour. But the temptation to focus obsessively on Labour's ownership of and commitment to preserving the NHS shouldn't cause Labour to take its eye off the ball: and the ball is the recession, its dire consequences for millions of ordinary people, and the chaos into which it has dragged the nation's finances (including especially the colossal amount of national debt accumulated as a result). The election result will turn on which of the two major parties has the more convincing policies for dealing with these inter-related problems: unemployment, house repossessions, the threat to public services, how to get credit flowing again, what to do about the national debt. A key aspect of these questions is the timing of remedial action: many of the remedies that will be required are common to both Labour and Conservative policies. The really significant difference is when it will be safe and effective to begin to apply them.
Already the Tories' line is beginning to have a deadly effect on public opinion as voiced in the opinion polls, the radio and television talk shows, and the blogosphere. It makes some seemingly obvious points in simple terms:
"the economy is in ruins; as so often before, a Labour government has presided over economic disaster, and a Conservative government will have to come to the rescue; reckless spending by the government under Gordon Brown as chancellor and now as Prime Minister has been financed by borrowing on a colossal scale, resulting in an unprecedented mountain of national debt; this huge debt will be an albatross round our children's and their children's necks unless a new government has the courage to tackle it urgently, whatever the cost to some areas of government spending; yet all the Labour government can offer is more spend, spend, spend, thus running up ever more debt. Spending and the debt it incurs are the problem, not the solution."
Yet this whole indictment is utterly wrong, misguided, and dangerous. It's imperative that Labour should begin now to expose it as such. Continuing to parrot the well-worn mantra contrasting "Labour investment with Tory cuts" really won't do: on its own, that seems only to confirm the Tory charge sheet.
Labour's campaign needs to concentrate on a few relatively simple points:
* The recession is a global phenomenon affecting virtually all countries, not just Britain. To blame it on any single government is absurd and dishonest.
* It's generally acknowledged by leading economists and statesmen world-wide that the measures taken by Gordon Brown to save the banking system and then to limit the worst effects of the consequent recession have been far-sighted; they were eventually followed by all major western governments; they have already been beneficial, and they are already showing tentative signs of success. Each of them was initially opposed by the Tories, who however had no alternatives to suggest.
* To prevent the collapse of the banking and credit system and to stop recession turning into even more catastrophic slump, government has had to pump unprecedented quantities of money into the economy, first to allow the banks to function again, then to stimulate demand and through demand to get companies investing, re-employing workers, and producing once more. The recession has slashed government revenues through falls in the tax take, and forced government to spend more on unemployment benefit and other support for victims of the recession; so there has been no alternative but to fund the measures to re-float the economy by fresh borrowing. To have done anything else would have deepened and prolonged the recession – eventually requiring yet more borrowing and even higher debt.
* Recovery from recession is the overriding priority; paying off the national debt is strictly secondary. With low global interest rates Britain can afford to carry existing debt for as long as necessary while we start to re-inflate demand, and thus get unemployment down, credit flowing again, investment resuming, and the basics of normal economic activity back on the rails.
* Timing is the key. To start cutting government expenditure while we're still in recession – as the Tories are hell-bent on doing – is bound to make the recession worse, and to delay our recovery from it. The Tories have an instinctive ideological desire for smaller government spending less money, reducing taxes, minimising universal public services such as education and the NHS, and giving the leading role as providers to private sector companies motivated primarily by profit. They hope to seize on the national debt problem as an excuse for slashing public spending long before it can be safe to do so, even if it makes the recession worse.
* Whichever party is in office when we start to move out of recession is going to have to start making painful and unpopular cuts in selected areas of government spending. Some taxes will need to be increased, too. No-one denies the eventual need for some expenditure cuts and some higher taxes. The questions are: which cuts: which taxes: and when? On all three questions the Tories are terribly wrong. Only Labour will target cuts which will do least harm to the most vulnerable and to those who have already been hard hit by the recession. Only Labour will ensure that higher taxes mainly affect those best able to pay them. Only Labour will defer until we are clearly out of recession measures to deal with the national debt which will torpedo the recovery if imposed too soon. Only Labour will force restraint and reform on the Tories' friends in the City.
All this can be summed up quite shortly. The big increase in debt has been the right and necessary consequence of action to prevent a total economic and banking melt-down: other countries are building up and carrying higher levels of debt than us without having nervous breakdowns about it; a huge amount of the problematic debt is private and banking rather than government debt; Britain acting alone couldn't have reined in the bankers before disaster struck, because the credit crunch and world trade imbalances are global phenomena beyond the reach of any individual government; with interest rates so low, there need be no tearing hurry to wind down the debt, which we could if necessary carry and service for years; and it will be suicidal folly to start cutting government spending in order to reduce the debt level while we're still in recession, as the Tories seem hell-bent on doing.
It may not be too late, even now, to start getting this message across. To do so will require a disciplined and united government and party, which means a truce in the squabbling between the Blairites, the Brownites, the Old Labour grassroots, and the New Labour revisionists. If this kind of self-indulgent, petulant in-fighting continues, we're going to wake up one morning soon to find a Cameron government selling off schools and hospitals, slashing taxes on the rich, closing down public infrastructure programmes, giving the nod to its banker friends to resume bonuses as usual, and telling the lengthening queues of unemployed that they must bear more than their share of the pain of cuts in benefits because their plight is all the fault of the Labour government and Gordon Brown.
A recent letter in the Guardian carries a warning that should be printed out and pinned to every notice-board in the country. The most frightening danger facing the country is not the credit crunch, not the recession, and certainly not the national debt: it's the threat of a Conservative government, and what it will do. It's time to say so, loud and clear.
Brian
www.barder.com/ephems
The key issue at the general election: it's the economy, stupid
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Thanks for the comment - we'll have to agree to disagree!
However, I cannot let pass your comment on Gordon Brown and private sector pensions. Mr Brown's so-called 'tax-grab' on pensions has passed into mythology as being wholly responsible for the demise of our private sector pension schemes. As I have written before, Stephen Yeo of consultants Watson Wyatt has stated that it (the 'tax grab') "isn't in the first three of causes". The three main causes he gives are : (i) the indexation of pension payments, made obligatory by the Pensions Act 1995 (ii) people living longer and (iii) bl**dy awful equities performance, world-wide, since 1997.
In an article in the FT a couple of weeks ago, Adrian Waddingham of senior partner at Barnett Waddingham, the UK's largest independent firm of actuaries singled out the introduction of compulsory indexing, which, he said, 'doubles the cost of pension provision' and a 2003 law that enshrined a pension deficit as a legal obligation (to make good).
Going into the recession in the early 90s national debt was below 30% of GDP. We could therefore afford to increase borrowing (and the % of national debt to GDP) as tax receipts fell and the cost of the recession (unemployment benefit etc) rose. The Tories then turned this around in the last years of the Major government, bequeathing Brown a growing economy, rising tax revenues and a falling national debt.
For 2 years Brown stuck to the spending plans he had inherited (apart from a disastrous stealth tax on private pension funds which is largely responsible for the ruination of our private pension schemes). Then he started spending (sorry, "investing") like there was no tomorrow. The result is a public sector which is expects (indeed, requires) more to maintain it than tax revenues in good years. That is why public debt is now rocketing out of control (it looks as though Darling's forecast of £175 billion this year is optimistic).
PS Thank you Brian for replying again. I don't think we're going to agree, but it's good to debate.
"The problem is that the things that the NI fund was meant to pay for are now comfortably in excess of what NI raises, and therefore general taxation makes up the difference."
Not true at present, Jaime. Take a look at the table that I referenced : accumulated funds have increased from £14.9 billion in 1999/00 to £49.3 billion in 2007/08, which, by definition, means that payments in have exceeded payments out by some £34 billion over that period. There have been no payments in from the Consolidated Fund, ie from general taxation, in that period.
If I go back a few years, to the period 1990/91 to 1998/99, accumulated funds increased from £12.2 billion to £12.6 billion (negligible) - with a drop to £3.6 billion in 1992/93. There were, however, payments in from the Consolidated Fund of £21 billion in that period. There were similar payments in (£22 billion) from the Consolidated Fund for the period 1980/81 to 1989/90.
In short : the NI Fund is in better shape at present than it has been for years : it had accumulated funds at the end of fiscal 2007/08 for eight months payments, compared with accumulated funds equal to just two months payments at the end of fiscal 1996/97.
I don't see any difference between NI and general taxation - both are sources of revenue. When we arrive at the situation the NI is nominally paying general revenue for short term shortfalls, but the general revenue is paying an increasing proportion of fees that NI was originally meant to cover, well in my mind it's time to simplify.
National Insurance is not a tax - it is what it says on the tin : 'insurance'. If you take a look at the income/expenditure statement for the NI Fund, you will see that all expenditures from the fund are for specified social security payments (retirement pensions, maternity and incapacity benefits and so on). It is also remarkably efficient as far as administration costs are concerned : in 2007/08, just £1.4 billion was charged for £82 billion in receipts and £71 billion in payments : in round figures, 1 per cent.
Government is prohibited, by law, using receipts from the NI Fund for current expenditure in other areas. At present, the NI Fund has accumulated funds of £49 billion (which has been 'lent' to the government for capital expenditures, and which government currently pays £2.5 billion back in to the NI Fund as investment income).
The numbers that I quote are available in table 10.1, Annual Abstract of Statistics 2009.
You are absolutely right to point out that the recession is a world-wide phenomenon. The public finances at the end of fiscal 2007/08 were in good shape : public sector net debt stood at just 36.5 per cent of GDP (compared with an inherited 42.5 per cent of GDP) and public sector current expenditure was 37.7 per cent of GDP versus receipts of 38.6 per cent of GDP.
Of course, after Spring of last year, 'events, dear boy, events' (as Harold Macmillan famously remarked) occurred in pretty quick succession on the other side of the Atlantic : Bear Sterns, Lehman Bros, AIG, Merryl Lynch, Goldman Sachs and the contagion naturally lurking as a consequence the globalisation of the financial sector was unleashed. Fortis in Belgium/Netherlands and UBS in Switzerland had to run to government for cover.
Your point about borrowing for capital expenditure being valid is correct, and this, by and large, is what Labour did. In fact, public sector net borrowing peaked in 2004/05 at 3.3 per cent of GDP, and was down to 2.4 per cent of GDP in 2007/08. This compares with 7.7 per cent of GDP in 1993/94 and an inherited level of 3.4 per cent of GDP in 1996/97.
It will be a long haul to convince people of the world-wide nature and consequences of this recession and, to be truthful, I don't think it can be done by the likes of you and me. Not for the first time, a Labour government has been 'stuffed' by the financial sector ; the irony this time, it was unintended, compared with previous instances.
1. It seems to me entirely legitimate for governments to borrow to finance capital expenditure. Everyone else does -- house-buyers with mortgages, businesses when they expand and build new premises, etc. The idea that there's something uniquely dangerous about a national debt that can be rolled over from year to year and serviced affordably seems to me mistaken. It's only a couple of years ago that we paid off our debt to the Americans incurred in loans to get us through the second world war. We carried and serviced that debt for all those years without anyone regarding it as a frightful problem.
2. Northern Rock, Bradford & Bingley and HBOS got into trouble because they had accumulated toxic debts -- derivatives including sub-prime mortgages that had become so complex that absolutely no-one knew enough to judge how much, if anything, they were worth. Virtually everyone believed the banks' line that these derivatives were actually extra safe because they involved spreading the risk and offsetting dubious loans with solid, safe securities wrapped up with the toxic stuff. It's unreasonable to blame Brown, or the regulatory framework he had set up, for having believed this story, which of course proved hopelessly wrong. But which major regulatory authority or major investment house in the world spotted the flaws in the system before the crunch, and what would have happened if just one national regulator had stepped in to try to ban its own national banks and investors from holding these toxic debts? It couldn't have been done by any single regulator, even if anyone had seen the light. Of course there were a few prophets crying in the wilderness that we were all doomed!, doomed!, but to have acted alone on their warnings would have seemed simply eccentric.
As for the housing bubble and low interest rates, it would have been politically very difficult to have deliberately raised the cost of borrowing for house purchases -- almost certainly provoking howls of protest by an opportunist opposition -- and impossible to raise interest rates on mortgages alone without also sending up the cost of all productive investment, driving investors overseas where they could borrow to invest more cheaply. Interest rates can't be fixed arbitrarily by one country in isolation without reference to prevailing international rates. Anyway, low interest rates bring many benefits to offset their accompanying dangers (i.e. dangers of bubbles which eventually burst).
3. The pros and cons of nationalisation of failed banks versus leaving them in private hands and pumping money into them (or letting them go into liquidation) can be argued endlessly. I think most qualified observers, including St. Vince, agreed in the end that the nationalisations which were eventually done had become inevitable. As for using taxpayers' money (whether or not borrowed) to sustain the dividends and bonuses of private sector shareholders and senior managers, while they "slimmed down" by sacking junior staff in their thousands and consigning them to unemployment benefit at, again, the taxpayers' expense -- doesn't that go rather against the grain? Governments do have an obligation to protect the public interest, sometimes against the rapacious demands of private interests. And I can see no case at all for paying compensation to the shareholders of banks which would have gone bust but for nationalisation.
4. Current unemployment levels are as high as they are because of the recession, for which (I repeat!) the government can't be held responsible. Pre-recession unemployment levels have been historically extremely low. Do you remember unemployment hitting 3 million under the Tories? Youth unemployment has been a problem for all governments. Gordon Brown has sought to reduce it by a whole bevy of ingenious measures, with a degree of success -- IOW, until the recession it would have been even worse but for those schemes and systems. The fact is that we have a large and mainly unemployable underclass in Britain and no-one in any political party has much idea what to do about it. Now the recession is inevitably making matters hugely worse. Many of the thousands of youth jobs whose creation Brown as Chancellor and prime minister has actively and successfully encouraged are now being lost as young people are the first to be laid off by struggling businesses.
In short, the causes of all these disasters and problems are almost always far too complex for responsibility to be laid at any one door. Blaming Gordon Brown or the Labour government for them all is too simplistic by half. Apart from anything else, it's impossible to demonstrate to those who are ideologically determined not to listen that matters would be even worse without the policies and measures that the government has taken and for which it deserves credit. It's fatally easy to forget that until last autumn the vast majority of people in Britain were enjoying unprecedented prosperity and a steadily rising standard of living, though admittedly at highly unequal rates. It's easy, but false, to say now that it was all built on sand.
Brian
http://www.barder.com/ephems/
(1) Brown did not only borrow for "investment". He just called public spending "investment". It was pure New(Labour)speak. All governments have capital expenditure, year on year. It has to be funded from annual income, not on the never never. And Brown also indulged in off-balance sheet borrowing (Enron-stye) through the PFI.
As for the benefits of this investment, see (i) over 100,000 students chasing 10,000 university places; (ii) this year's graduates; (iii) the vast number of NEETS; (iv) the NHS - see this from yesterday's Independent: http://www.independent.co.uk/opinion/commentators/ian-birrell-why-i-dont-believe-that-the-nhs-is-sacrosanct-1775088.html
(2) You haven't answered my points about the reason why Northern Rock, Bradford & Bingley and HBOS ran into trouble and about the debt/housing price bubble fuelled by low interest rates. This is Brown's fault. It is nothing to do with any over-dependence on financial services. It is about a number of domestic lenders being poorly regulated and poorly managed. Brown set up the regulatory system and he must answer for its failings.
(3) Most of the financial services sector has survived this rescession so far without being natonalised. There are many insurers, fund managers, stockbrokers, banks of all kinds, etc from all over the world in London and Edinburgh which are still afloat. Some are even making money. The drying up of inter-bank lending in 2007 triggered the crisis, but it was an old-fashioned bubble. The credit crunch burst the bubble, but it was going to burst at some point.
(4) I see no reason to have nationalised those banks that have been nationalised. If the problem with, say, Northern Rock was lack of access to funds, the Bank of England, as lender of last resort, could and should have lent at a high rate of interest. As you say, it is possible on that basis that the taxpayer will make a profit by having expropriated the shareholders without compensation and so gained ownership of a valuable asset. Part of my pension and my endowment policy will have been invested in Northern Rock, I suspect. If, however, Northern Rock was insolvent and the taxpayer will make a loss, we should have taken statutory assignments of the accout-holders' rights to claim in return for paying them the full amount of their deposits (to maintain faith in the banking system) and put it into administration.
(4) I see the 10% fiasco as typical Brown: headilnes rather than substance. 12 years and billions of pounds and what is there to show for it? For example, this government and those that have supported it should be ashamed at the level of youth unemployment. The number of NEETs is far too high. It was reported in June that 935,000 16-to 4-year-olds are a Neet - 'Not in Education, Employment or Training' - up 15% in just one year. It's going to hit a million. Ignore the spin - check the real figures.
With 11% National Insurance, which is tax, plus an extra 1% above the upper earnings limit, so there's plenty of people paying 52%, as a marginal rate anyway.
My point, to repeat, is that Afghanistan is unlikely to be an election issue as long as both the main parties support Britain's continued participation in the war, virtually without any reservations.
Brian
Oh, and I can't resist pointing out that no-one in this country pays "50-60% of our salaries in tax": these are marginal rates, not rates levied on the whole of anyone's income. Anyway the highest rate currently in force is 40%, with the possibility of a future 50% marginal rate on the incomes of the seriously rich, to be levied only on that part of total income which exceeds £150,000.
Brian
http://www.barder.com/ephems/
I accept I'm a bit out on the limb about recovery timing, because to be fair I'm basing it on the car industry coming out of recession from September onwards, because instantly the 30% drop in volume globally starting September 2008 drops out of the year on year equations.
Remember. When Rover's single lowish volume factory went under it initially knocked about 1% off GDP. (The growth in the rest of the economy camouflaged this.)
A single medium/large car plant has a big impact on the countries economy, not just the local economy.
Honda have re-opened their Swindon plant after it being shut for months, and this will only be fully reflected in the third quarter figures.
Technically any increase in volume after September over last year, is growth, even if it's still a volume that's 29.9% off the peak instead of 30%.
As you appreciate, coming out of recession is not the same as being in the same position as before it. It just means the economy is starting to grow again.
Unemployment will increase because put simply, it will take a long time to build up to the previous demand levels.
The big risk is a double dip recession because businesses start building up output too fast. That's probably more of an issue for Japan and the USA (house building has dropped again in the USA , and this has been a leading indicator for consumer durables.)
Biggest short term risk? Whoever buys Opel/Vauxhall, closes the Vauxhall facilities, which will immediately hit GDP. However, I think it's very much an outside chance at the moment, providing Germany doesn't provide all the backing for the deal.
I appreciate this is pretty much a personal reading of the situation, based on a particular key segment. But let's face it, the banks seem to be over the worst now as well.
I have direct, frequent, continuing and deep experience of a locally accountable hospital trust. Let me tell you that the output of my trust is pretty rubbish. There's more politically motivated argument in trust meetings about clinical priorities and assignment of budgets than can be supported by the knowledge of Trust members of practical medicine. They recently spent an hour debating the merits of a shift of priorities (and money) from acute care to preventative care, until the late-arriving Clinical Director informed the muppets that if they wished to shift from acute to preventative care, they would need a set of differently trained specialist Doctors, 5 years of transition, and to answer for those future acute care patients who would die more quickly because of a lack of acute care staff. These realities had not, until his intervention, been discussed at all - a case of the blind leading the blind, uninformed by real life considerations, but with the power to make significant changes.
It doesn't really fill you with confidence, does it?
Because I wasn't really rich or poor - but am definitely much poorer under labour.
I'd dispute that maggie damaged the working class - I did OK by her - and so did you by the sound of it - like you I left school at 16 with no family 'wealth' behind me (a single parent, but far too proud to even think about taking any benefits - just a damn hard worker) - I was doing very well 'till labour turned up and am now battened down, getting by for now, but wondering how the kids education (especially university) will be paid for.
Just so you know where i am coming from, I was brought up on a sink estate with a single mum in the 60s, very poor but lucky enough to go to a good school. Left at 16 and went into retail management, shop manager at 19, bored by 21 and moved into finance, by 23 had 30 associates working for me and certainly was regarded by many as a Thatcher child. Set up my own business 20 years ago built two multi million turnovers companies and employed over 100 people in that time. I treat my staff well and have always shared the profits of the companies with them. My pay has never been substantially higher then them and at times of hardship a lot less. I thought Maggie was great and achieved what had to be done. At the same time appreciate the damage that was done to the working classes and those not fortunate enough to get in a good school or Parents that understood how the world was changing. Voted Conservative most of my life but did not vote Tory since Major became Primeminister. Hated Bliar from the day he appeared and saw through his lies. Thought Brown was wrong on many things but believed he was moral and financially sounded good and then within a few years showed his Political leanings would destroy him.
The last 12 years has been truly awful,huge debts, over 50% of the Country earn there income from Taxes and the bill keeps going up, crazy and not sustainable. Creating non jobs is pointless as in the end the money will not be there to pay for it so cuts will have to be made. Highest sexual diseases, under age pregnancies, highest level of drinking and drug taking. The Poor got poorer, the rich got richer, higher unemployment than when Nu Lab came to power. PFI schemes that make taxpayers pay 30 million for a 5 million school, ridiculous.
When we came out of the 70s early 80s the young in this Country got past racism this Gov'ts immigration policies have put race relations back to the bad old days. The NHS has improved but if any Company director spent that much for so little return he would be fired. A 10 year Transport Plan and 10 years later launched a 10 year plan, meanwhile the roads have ceased up and full of potholes and Public Transport so expensive we are forced to drive.
Most disgusting of all thinking its ok to take 50-60% of our salaries in tax and think its ok to spend more, how dare Labour or Tory Gov'ts think this is right,especially when we see Billions wasted year after year.
No vote on the new USSR the EU.
Last but not least we used to be British one rule of Law for us all to live under, Nu Labour have created so many interest groups and legislated division so millions think they are hated in thier own Country, the growth of Far right Parties such as BNP proves this.
I could go on but you see the point, Labour are meant to want to help the working class but always end up failing to make thier lives better?!At least Conservative Gov'ts create wealth, Labour can only spend until its gone.
Quite - I really don't understand how people can be *so* deluded that they think we will believe what they claim when we *KNOW* the truth is different - We *KNOW* the truth because we are living it!
Absolute tripe. He was backed into a corner. It wasnt far sighted to do this. It was a mark of desparation driven by a situation he created.
He undermiend the regulatory system by ham fisted 'reforms' that left gaping holes
He was so self absorbed in getting the Premiership that he allowed the economy to run out of control
As Chancellor he failed to act and destroyed the financial legacy left to New Labour by the Conservatives.
It was he who sold off our Gold Reserves at bottom of the market prices and poured millions into public services that now offer worse results
We KNOW What he did and we will hold him and Labour to account as soon as he calls an election.
I can, I don't know anyone who knows why we are there or what we are trying to achieve and that includes people who have fought there.
Oh no, we mustn't upset the Americans, that would never do.
Brian
http://www.barder.com/ephems/
Brian
http://www.barder.com/ephems/
I think my only reservation about your comment is that I'm less optimistic than you about how long it will take for the UK to come out of recession. Even if the recession does technically end before or very soon after the general election (and the election may perhaps be in March, as Michael White suggests?) in the sense that we may start to get positive growth figures quarter by quarter around then, I suspect that it will take a lot longer for the effects of the recession to be reversed to the point where people are convinced that the recession is over. The banks seem likely to be very sluggish about resuming lending, which will retard any appreciable recovery in new investment, which will retard any appreciable fall in the already disastrous unemployment figures, which in turn will damp down the increase in overall demand in the economy on which a real recovery from recession ultimately depends. The fact that the monetary policy committee of the Bank of England is still printing money (and not even as much of it as Mervyn King would like!) in the form of Quantitave Easing suggests a much longer time-frame for recovery than you envisage and indeed King says explicitly that it will be a long, hard road. If the Tories come in in the spring and start wielding the axe far too soon, the road will be even harder and even longer. That's the essence of the message for Labour, really.
Brian
http://www.barder.com/ephems/
1. Of course the recession is a world-wide phenonemon, but we have been particularly badly hit. Our economy is in decline still, while those of France, Germany and Japan are growing. If they were following the Great Gordo's lead, how come they've got out of recession before us?
2. Our banking crisis was largely domestic. Northern Rock, HBOS and Bradford & Bingley were domestic lenders who made too many bad loans. This has very little to do with America and a lot to do with the regulatory system designed by the Great Gordo and his failure to stop the housing bubble, fuelled by low interest rates. This bubble provided the extra money to generate a growing economy. Essentially, as a nation we were borrowing against rising house values and spending the money. Now, unsurprisingly, it has ended in tears.
3. None of this is helped by the fact that under the Great Gordo government borrowing was far too high in the good times. This means that we entered the recession with a huge structural deficit. This means that borrowing has to be astronomic and will saddle future generations with vast debts. More prudent countries were better placed to weather the storm.
4. Not content with presiding over the conditions which left us so vulnerable, the Great Gordo added his brilliant solutions. It was perfectly possible for the Bank of England to have lent money to the troubled banks as the lender of last resort. That is what it is for in a banking crisis. Instead, some were nationalised. That means that the taxpayer is stuck with the losses.
5. But when they were not nationalised, they were forced on healthy banks: the Great Gordo took great pains to let it be known that the Lloyds TSB/HBOS merger was his baby. Well, it did for Lloyds TSB which is now, but need not have been, a basket case.
6. The stuff about the Tories is just nonsense. You say:
"Only Labour will target cuts which will do least harm to the most vulnerable and to those who have already been hard hit by the recession. Only Labour will ensure that higher taxes mainly affect those best able to pay them."
This from the party which got rid of the 10% rate in order to get a good headline and denied that it would hurt the lower paid! Forget it.
For this to fly, your few relatively simple points need to be backed up with evidence/proof, not just declared as fact - the public's gullibility ended with the expenses crisis... Most of your points are just your own declaration of 'the truth' they will only convince very stupid people - and it is already only very stupid people who will be voting labour at the next general election... you aren't winning over anyone...
Let us not forget Brown has done everything in his power to conceal the true extent of the UK's fiscal position with PFI and other off-balance sheet gymnastics. He did it because he thinks it does not matter because he is a socialist. He, and the Labour party, will find out it really does matter next May when Labour will perhaps be fighting an election with 3 million unemployed.
Nice positive and thought provoking piece. Shame nobody in government thought about this providing an equally clear narrative explanation nine months ago.
'A key aspect of these questions is the timing of remedial action: many of the remedies that will be required are common to both Labour and Conservative policies. The really significant difference is when it will be safe and effective to begin to apply them.'
Unfortunately whatever you think of current Tory comments about reducing spending, the recovery should be underway by the time of the next election. The main issue being rising unemployment. Because the PM has resolutely refused to tell it how it is for the whole of this year, nobody is likely to believe him now. That makes him part of the problem. Tories can just pretty much sit back and take the credit 4/5 years later.
The inability of Gordon to be straight with the public is part of the reason that the Tory mantra is believed. As you appear to acknowledge it does contain some elements of truth. It's also in their interests to paint it really black so that they get more credit after winning the next election for 'sorting things out'.
After all the books will have to be balanced at some point. Whatever the shade of the government.
I agree we need to become more realistic/truthful with the message. Problem is we've lost most of the audience already. No one is listening.
GB has so little capital left with the public that even your list of a few simple points needs to be whittled down to those points might actually believe without applying torture to the spokesman to see if he really is lying or not.
'*The recession is a global phenomenon affecting virtually all countries, not just Britain. To blame it on any single government is absurd and dishonest.'
Too late, and difficult to get people to buy into as were amongst the first in and not one of the first out. Explainable because the city's 'success' and relative size means we much more exposed to this type of financial problem than say Germany, Japan, or France, which have more balanced economies.
I can't think of a single cabinet minister who would be given the time of day in trying to explain this. They have chosen the path of a cabinet collective lack of credibility, in not moderating the governments message so far.
'It's generally acknowledged by leading economists and statesmen world-wide that the measures taken by Gordon Brown to save the banking system and then to limit the worst effects of the consequent recession have been far-sighted; they were eventually followed by all major western governments; they have already been beneficial, and they are already showing tentative signs of success. Each of them was initially opposed by the Tories, who however had no alternatives to suggest.'
I don't think even a glowing recommendation from Pres. Obama would be able to overcome the contempt Gordon is now held in for for his willfully public lying and disingenuousness.
'* To prevent the collapse of the banking and credit system and to stop recession turning into even more catastrophic slump, government has had to pump unprecedented quantities of money into the economy, .....The recession has slashed government revenues through falls in the tax take, and forced government to spend more... so there has been no alternative but to fund the measures to re-float the economy by fresh borrowing. To have done anything else would have deepened and prolonged the recession – eventually requiring yet more borrowing and even higher debt.'
Somebody at least got the message over not repeating the errors after the Wall St crash.
This is one of the few consistent messages from the government, but it's generally impossible to prove things could have been worse. Again the credibility problem strikes at the heart of anything we try and say.
'* Recovery from recession is the overriding priority; paying off the national debt is strictly secondary. With low global interest rates Britain can afford to carry existing debt for as long as necessary while we start to re-inflate demand, and thus get unemployment down, credit flowing again, investment resuming, and the basics of normal economic activity back on the rails.'
This needs concerted backing from prominent and respected economists to gain any credence. Ministers simply won't be believed.
'* Timing is the key. To start cutting government expenditure while we're still in recession – as the Tories are hell-bent on doing'
Doesn't matter what they would have done, we won't be in recession by election time. Not unless Gordon has more nerve than he has shown so far when dealing with purely political issues and calls a snap election at conference. That would be at least a sign of a fight instead of resignation to the inevitable defeat next year. The electorate might respond better to that.
'* Whichever party is in office when we start to move out of recession is going to have to start making painful and unpopular cuts ...No-one denies the eventual need for some expenditure cuts and some higher taxes...'
Agreed on the need to bring the spending into balance in a controlled way, but currently the government message doesn't seem in line with this. Causes a credibility problem again.
Generally I agree with your positive prognosis, however, the reality is that we are caught in a trap similar to Major's government of being hated for ministers/ex-minsters/MPs feathering their own nests. All held in equal loathing as either liars, thieves, or incompetents.
I think you've proposed a plan for trying to get back at the election after next, not this one. But frankly I think that's the most realistic type of plan available at this time.
Anybody who seriously thinks we can win the next election is living in a dream, or has a full set of polaroids of Cameron & Co up to no good with various cuddly pets in an abattoir, clearly involving puppies and kittenz, or knows about some earth shattering event occurring in the next few months. So I think we can assume they're deluded.
I hope this doesn't come over as too negative, because we actually need people to try and explain clearly what is being done, and why, without resorting to meaningless slogans that don't bear too close a scrutiny. I'm just afraid that we have lost the audience for the time being for anything, and it's going to be a slow hard climb from here.
We will be out of a technical recession by the fourth quarter at least unless something unforeseen goes horribly wrong.
Er, no - it was entirely Brown's fault for buggering up a perfectly good regulatory regime and replacing it with a hopeless three-tier construct designed to destroy any alternative power-base, such is his control-freakery and paranoia. Prior to that the Bank of England had monitored banks perfectly well for 150 years. The odd bank crash happened, yes, but there was no systemic failure.
Tories believe in light regulation, yes - but they also believe in RIGHT regulation. If you want proof of that, look at all the regulatory bodies set up by the Tories to keep a beady eye on all those privatised utilities. Ofgas under McKinnon, especially, had a reputation for draconian action to stop British Gas from abusing its at the time monopolistic position.
And who was it who built up mountains of debt in the fat years when he should have been paying it off? Who was it who spent vast amount of money on mostly unreformed public services, and employed 800,000 extra public sector workers to little discernable effect. Why 'Big Government' Gordon Brown.
Thanks Labour!
http://www.byrnetofferings.co.uk/2009/08/increasing-public-spending-is-useless.html
Simple really.
It may be unreasonable to blame the recession on Gordon Brown, but it is equally unreasonable to exonerate him from all responsibility for it. The recession didn't fall of a passing comet, it was allowed to happen and Brown was one of those that allowed it to happen, so blame, as to a proportion, must rest on his shoulders.
Odd that you blame the Tories for the light touch regulation. I may have been light, but boy was it durable; it survived over a decade of Labour administration. Maybe that was the problem; it was so light they never noticed it.
Blimey Brian, you do live on a different planet, its not the TORIEZ-EAT-KITTENZ-LOL who have been in power for 12 years is it?
GB based HIS economy on imaginary house prices, consumer and government debt, he put nothing aside for a 'rainy' day and PROMISED an end to boom and bust. I don't give a fig if you think its unfair, most of it is his fault. Get over it.
This'll make you laugh: http://www.independent.co.uk/opinion/commentators/sean-ogrady-empty-words-return-to-haunt-brown-1774042.html
France and Germany are already out. Why isn't the UK?
£36bn to computerise the NHS as opposed to the estimate £9bn.
Productivity that is still at 1997 levels despite 'investment'.
And outcomes that have not exactly moved up to anywhere near the 'world-class' healthcare system that Labour promised in 97, 01 and 05.
Yeah, quite a record Labour are defending.
You say that "a lot of the public pin a reasonable (and fair) amount of blame for the recession on Gordon Brown", but a main part of my post is devoted to showing that blaming the recession on Gordon Brown is demonstrably neither reasonable nor fair. The task of those who want to save our society from yet more of the ravages of Conservative ideology is precisely to expose that Tory lie for what it is.
Brian
http://www.barder.com/ephems/
The Tories want to create the largest quango ever - the NHS Board - which will override all the structures that Labour has created to try and make the NHS more accountable. If you support making decision making local, then you should work to prevent the Tories getting into power.
Most of the electorate have no interest in "Labour" or "Tory" but simply want a government we can trust, and who trusts us. Who does not treat us as all potential paedophiles, terrorists, money launderers and car thieves unless we can prove our innocence. And who realises that our opinions on such things as the democracy - particularly in the EU institutions - matter a great deal.
You need to rethink this completely if you think the "threat" of a Tory government will overcome all the rotten government of the past twelve years.
You appear at least to have a strategy - Gordon Brown, however, appears determined to lie his way towards a general election. Which of course won't work.
I'm not going to nit pick away at some of your "simple points" - but suffice to say I think a lot of the public pin a reasonable (and fair) amount of blame for the recession on Gordon Brown.
Brown has lied and distorted so often recently, I don't think any positive action he has taken with respect the recession will be heard by the public.
My main point of contention is that I think that Labour are absolutely the wrong people to make the cuts. I'm secretly hoping that the Conservatives will be implementing very Dan Hannan-like proposals. That would mean:
- Cuts informed by planed and integrated reform
- Small government.
- Localised Decision making
- A vision based on best practice around the world
- More government resources are focused on the most vulnerable.
I suspect Cameron can't show his true colours. I know Brown and I've seen his "Building Britain's Future" twaddle. I just have to hope that Hannan and Carswell's plans have seriously influenced Conservative policy and as an act of blind faith put my "x" against the Tories.