The upshot of all this state intervention to support Britain’s financial system is that the official National Debt (which does not include most the PFI/PPP expenditure) broke the £1 trillion mark in January 2011. It will continue to rise rapidly even under the Coalition’s plans to eliminate the structural deficit, that is, the deficit which exists even when the economy is working flat out, because of the on-going massive UK public spending deficits which will be around for a few years. That is what the Blair/Brown governments are responsible for. Not only the havoc they have wrought in office, but the mess they have left behind.
What could the Blair/Brown governments have done? Within the constraints of the various treaties affecting commerce Britain was signed up to by 1997 – primarily the EU and WTO treaties – what might a prudent government have done during 13 years in office? They could have instigated credit controls on all forms of lending from mortgages to credit cards; insisted that the banks had much higher levels of liquid reserves; banned all financial instruments which extended the question of ownership and liability beyond the original contracting parties, forced the banks to run their retail and investment activities as separate companies and then offered no government guarantees or other support to the investment companies and limited their exposure to other countries’ sovereign debt.
These activities should all have been possible even though we are within the EU and signed up to the WTO treaties because what competition law internationally requires at present is that all subscribers to a treaty are treated equally within the various national jurisdictions covered by the treaty. However, we all know how perverse and dishonest the application of EU law has been and it is possible that some or all of the measures could have been ruled illegal by Brussels. In that case the Gordian Knot could and should have been cut by Britain’s withdrawal from the EU.
What has Labour to say about this catastrophic management of the national finances? Labour are shameless. At the 2011 Labour Party Conference the shadow chancellor Ed Balls, the man with a good claim to have been Gordon Brown’s closest supporter and aide during Brown’s period as Chancellor, blithely shrugged off Labour’s grotesque mismanagement of the economy with this:
“Don’t let anyone tell you that Labour in government was profligate with public money – when we went into the crisis with lower national debt than we inherited in 1997 and lower than America, France, Germany and Japan.”
It is true that the official national debt represented as a proportion of UK GDP was lower in 2008 than 1997 (36% as against 42% in 1997). The first thing to note is that the official national debt in 2008 was a fudged figure which excluded most of the PPP/PFI costs. If they had been included, it is probable that the 2008 official percentage figure would have exceeded the 1997 figure.
But the absolute amount of money also matters, both because there is a greater amount to service (the ease of which is subject to general economic conditions at home and abroad) and because if a recession shrinks the economy the percentage shoots up.
By 2010 the national debt had risen to from 36% to 52% of GDP, partly due to the growing annual public deficit but also because the economy shrank by over 5%.
Balls continued in his conference speech with “And don’t let anyone say it was public spending on public services here in Britain which caused the global financial crisis.” Do not fret Mr Balls, no one has suggested that you and your friends were powerful enough to do that. The point is you were in a position to mitigate its effects. Just in case anyone had the bad taste to keep on pointing out NuLabour’s disastrous folly (that’s being kind) Balls urged the electorate to adopt a collective amnesia:
“For families today – struggling to pay the bills, worrying about their jobs – being told about the great things Labour did in government isn’t much comfort… it doesn’t pay the bills, help get a job or secure the pension.”
So there you have it, the Blair and Brown years were glorious and the fact that Britons are becoming rapidly more insecure and poorer nothing to do with Balls or any of his Brownite cronies.
Like the Bourbons, the Labour hierarchy has learnt nothing, but unlike them, has forgotten a great deal of inconvenient facts. The extent to which Labour is still living in a fantasy world is their alternative to the Tory deficit cutting plan. Instead of aiming to eradicate the structural deficit by 2015, which would produce a projected National Debt of £1.4 trillion, they wished to merely halve it. This would add many tens of billions more to an already frightening level of public debt. That is the NuLabour mentality in a nutshell: that of the person buying on the “never never”.