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The economy only grew between 1997 and 2010 on the back of personal debt. When this stopped the government had to borrow.
That may, partly, be true
But the reality is most people happily went along with it
So the ramifications of the global financial crisis can be ignored as soon as Labour left office? The borrowing between 2010 and 2015 has nothing to do with the period 2007 to 2010, which is conveniently ignored?
It would have made no difference who was in office from 2007 – 2010, the borrowing would have been the same
That is a large part of the point I am making
And the point I am making is that the debt racked up in dealing with the financial crisis does not suddenly disappear by magic as soon as the financial crisis is deemed to have ended in 2010.
Oh dear, the perennial debt and deficit confusion
Try again
I’d very much like to see some impartial and non partisan debate, analysis and understanding of this.
I expect that Tory claims of Labour financial mismanagement are bullshit. Their case against Labour is mostly an ad hominem attack of “you can’t trust them to do anything!” built on the false pretext of “because they are financially incompetent”! It’s dreadful the argument has become framed in this way and that Labour seem to have fallen in to this trap.
That said, I expect any other government’s borrowing over the last five years would also have been much higher than in the ten years before, so I don’t think this is a reason, beyond the pretty vile hypocrisy, to pillory the Tories.
However, Labour, or another government, might have spent the money more wisely than the Tories have, rather than using the recession as an excuse to further their ideological cause. Though, of course, I’d have like it to have been an excuse to further the cause of the Left. Touché.
I actually posed a question because the answers are not clear
Like you I am annoyed by the representation that they are
To get a more accurate picture of the debt position in this timescale you would need to include the implications of the PFI surge. Including that variable might also answer a few second-stage questions.
PFI is important – but not enough to change the view significantly
And both governments did it
I think this is where you should be pushing the argument of your book!
PFI is a failure due to cowardly politicians in govt. A party-wide failure of nerve during the deluded era of hyper-neo-liberalism loads billions of PFI debt onto ordinary people who are left with worse services as a result.
It is a important discussion/debate!
Right, let’s begin with an unforeseen consequence. When Thatcher brought in the Poll Tax into England, her government tried to ease the pill by reversing a decade long process of reducing revenue support for local government. They didn’t do this in Scotland which displeased the Scots and helped trigger the rise and rise of the SNP, gee thanks. When Major’s government backed out of the Poll Tax further sweeteners were required to ease this transition too. The unintended consequence was a huge injection into the economy starting a period of economic growth that ran from roughly 1991 to 2007, an amazingly long period by post-WW2 standards.
The growth was not centred around industrial production however, a point of weakness. There were even years when revenue exceeded spending, years when the sun shone and the roof could be repaired. Unfortunately there was a determination to fund capital growth by a form of borrowing that kept the interest costs out of sight. Whether this was to satisfy gnomes of Zurich, the EU or the WMF is not important. The point is the Treasury colluded in disguising the truth. So the extent of the (quite genuine) economic growth was falsely represented to the world We all felt better than we were. Some of the years of surplus and near-surplus were actually years of modest deficit and some were worse still.
The first Gulf War meant an “open the coffers and spend” approach to defence spending that took a while to end, as did even more so the Iraq War a decade later. In reality we could not afford Trident let alone any replacement. Only, oh ironies, under the present Coalition, has defence spending been reined back with determination and to the extent of mSsively reducing capability. We aren’t sending in ground forces because we now cannot, never mind that we don’t want to!
Generally though the years 1991 to 2006 did not involve serious deficits. You cannot run surpluses year after year without risking a contracting economy so important is the state as a part of the economy.
The bulk of the deficits the Coalition inherited in 2010 was generated 2006 onwards in the form of debt servicing following the massive quantitative easing to get the economy moving again. People forget but such was the collapse of city economic confidence that banks were unwilling to lend to each other even on an overnight basis. Respectable banks, let alone the tiddlers and rogues! And revenues from taxes collapsed. One year receipts from Stsmp Duty were 18% of the previous year figure! It was not one head of revenues but almost across the board, with income tax the least damaged as most people stayed in work who were already in work, and as yet wages were not being forced down in real terms. So it was not so much a question of who overspent as what caused revenues to fall out of line with spending. The interest charges on the National Debt were certainly onerous but had we sustained growth from 2009 continuously the rising tax receipts would have made matters a good deal easier. It was throttling off that economic growth that was so unwise as to create a recession where there had been none before 2010, and a recession is always a formula for tax receipts to be lower than you want. The government has engaged year after year in a tail-chasing futile attempt to drive down spending including interest charges to match revenues which of course are not growing as they should because of the very austerity measures intended to close the gap!
I recognise a lot of that – although am not sure your QE analysis is right
That cancelled debt
Though the smoke and mirrors pretends it is debt, that is, the bank of England loan to the APF which, on paper, is supposed to be unwound (!), One can see what utter corruption is at work here lacking a scintilla of true democracy.
Does that mean that the Tories have increased UK debt by £572 Bn in 5 years?
Yes