Since 2010 the LibDems and Tories have been telling you a story – that the World Financial Crisis – which hit the US, Europe – devastated Detroit, California, Ireland, Latvia, Greece – was Labour’s fault, because they spent too much on welfare – or whatever.
It’s enough to have you rolling in the aisle – but they keep on repeating it. Because if a lie’s worth telling, it’s worth telling over and over again.
Especially when it’s a lie you need to tell.
It’s the LibDems cover story – we HAD to go into Coalition with the Tories, to save Britain from spendthrift Labour.
It’s the Tories excuse for the savage cuts that have been ruining so many lives.
It’s at the heart of both their election strategies.
The real story is different.
The recession and Crash were caused by over-extended, risk-taking bankers. Just cast your mind back to 2007/8. No-one was blaming government spending then.
The talk was all of Fred Goodwin and Lehman brothers – bankers not politicians.
And no-one was blaming government spending – because before the recession, Labour’s deficit was low – much lower than the Tories’ deficit in the 1990s for example.
As Ramesh Patel, himself a Conservative, pointed out
‘Labour in 1997 inherited a debt of 42% of GDP. By the start of the global banking crises 2008 the debt had fallen to 35% – a near 22% reduction.’
‘In 1997 Labour inherited a deficit of 3.9% of GDP (not a balanced budget ) and by 2008 it had fallen to 2.1% – a reduction of a near 50% – Impressive! Hence, it’s implausible and ludicrous to claim there was overspending. The deficit was then exacerbated by the global banking crises after 2008. See HM Treasury. Note, the 1994 deficit of near 8%.’
It was only after the banking crash and resulting recession that the deficit ballooned. And that always happens after recession – because tax takes go down, and things like unemployment benefit go up.
– Maybe the LibDems and Tories think we should just have left the unemployed to starve?
The deficit also went up because Labour cut VAT and increased spending – to help get us out of recession – just as Obama did in the US.
So the big deficit was the RESULT not the CAUSE of the recession; its CAUSE was a banking crisis – and the very large deficit in part a way of trying to get us out of the economic problem [but also, of course, of bailing out the banks, and picking up the social costs of the mess they had produced].
Labour’s strategy of VAT cut and increased spending as a way out of recession is a classic way of dealing with that situation successfully – and it was having the classic effects. It was working.
Growth had started again by 2010.
Then the LibDem/Tory Coalition got in – and slashed public spending and raised VAT massively – choking off that growth.
The LibDems and Tories also started to talk down the British economy, for their own political ends – fuelling a crisis of confidence.
George Osborne and his LibDem sidekick, Danny Alexander, stuck to their cut and slash policy for a couple of years – with devastating effects and permanent loss of economic output.
As Simon Wren Lewis, one of Britain’s leading macro-economists, puts it;
‘It will be some time before economists settle on a number for the total cost of the austerity mistake, but a conservative estimate would be that, in total, resources worth around 5 per cent of GDP will have been lost for ever by delaying the recovery. That’s about £100 billion, or £1500 for each adult and child in the country.’
‘As is now increasingly recognised, this extended period of stagnation reduced the long-term growth rate of the economy through the destruction of both human skills and physical capital.’
In the end, even Osborne and Alexander had to see some limited sense, though they never admit it openly. They quietly abandoned their much vaunted Plan A – though the housing price boom they fuelled is no help to most people.
One result of the Coalition’s actions is the low wage /high private debt economy we now have – where the deficit really is ballooning.
So why does it matter?
The story needs to be shown up for the lie that it is.
First, because that lie is a deliberate part of an election con trick.
As Ramesh Patel – a Conservative economist, remember – summed it up as long ago as 2012:
‘The deficit myth is the grossest lie ever enforced upon the people and it has been sold by exploiting people’s economic illiteracy.
Cameron is playing the blame game to depress confidence and growth to justify austerity. Secondly, to use austerity as justification for a smaller state to gain lower taxes. Thirdly, to paint Labour as a party that can not be trusted with the country’s finances again. Therefore, [the] Conservatives will win a second term because people vote out of fear. The latter strategy worked the last time in office (18 years) and will work again . . . . . . Hence, as people believe Labour created the mess they won’t be trusted again.’
But the second reason all this matters is because this is not just a question of the past – but about all our futures.
The Tories and LibDems are building their picture of the future on a lie.
And the Tories will use that lie to take us back to the 1930s – to do what they’ve always wanted to do – roll back the state, including the welfare state which looks after all of us, slash public expenditure as fast as they possibly can.
Meanwhile the LibDems are preparing themselves for another Coalition with the Tories. Given what happened last time, it isn’t even worth the effort of looking at their economic plans. They’ll just jettison them to keep power.
As the New Statesman – no enemy of the LibDems – puts it this week
‘Nick Clegg’s clear preference in this campaign for another partnership with the Conservatives, even at the cost of the UK’s EU membership, demonstrates that his party could enable further harm.’
Labour, by contrast, is building its picture of the economic future on the truth.
The last Labour government was by and large very competent economically, public spending was a good thing – and under control – and it will be again under Labour after 2015.
Times won’t be easy after May 2015.
Under cover of this lie, the LibDem/Tory Coalition have built a low-wage economy, where private business finds it hard to flourish and government income is down.
That’s the legacy, and Labour can’t turn it round in a few months.
But Labour can start the job.
What you need to know is – Labour was good at it before, and will be good at it again.
Just see through the lies.
Use your vote to secure a Labour government. And if you really want to help do that, support the campaign for Alex Sobel to win here in Leeds NW – sign up now.
The economic arguments which underpin the above analysis are complex – but important. They can be followed in a large number of articles and reports – dating back as far as 2010 itself.
We have assembled a few discussions and articles for those who wish to see the detail. We’d especially recommend the articles by Simon Wren Lewis, Professor of Macro Economics at Oxford.
Governor of Bank of England says Labour not responsible – Guardian Dec 2014
Macro economists berate Coalition’s economic policies on austerity
Ramesh Patel Oct 2012
2010 – Liberal Conspiracy
Simon Wren Lewis – The Austerity Con – London Review of Books Feb 2015 http://www.lrb.co.uk/v37/n04/simon-wren-lewis/the-austerity-con
Simon Wren Lewis – New Statesman April 2015 http://www.newstatesman.com/politics/2015/04/economic-consequences-george-osborne-covering-austerity-mistake
Robert Skidelsky – The Welfare State did not cause the crash, so why s George Osborne cutting it.
Larry Elliott – No, Nick Clegg, in 2010 Britain was not ‘in the midst of an economic firestorm’
“The mess we inherited” some facts to fight the big Tory [and LibDem] lies
Paul Krugman, April 2015