Blaming the Banks

Last night’s Question Time election special, which saw the leaders of the three main parliamentary parties face an extraordinarily intelligent audience (by Question Time standards) in Leeds gave Cameron the chance to pull out his prop, the note left in the Treasury by the outgoing Chief Secretary of the last Labour government, Liam Byrn.

This appeared to hit home with people again, especially based on the obvious anger directed at Miliband when his turn to talk came. Catherine Shuttleworth, who employs 76 people in a marketing company in Leeds, said that such an issue was no ‘joke’ – as Ed Balls has described it.

Miliband in turn used the defence that the poor economic situation was down to the financial crash.

Well, that’s not quite the full story. Labour had been ramping up the deficit prior to the crash, and Andrew Neil took Hilary Benn to task on this on today’s Daily Politics.

The key points:

  • In 1997, Labour inherited a national debt of £300 billion.
  • AFTER 14 years of economic growth and BEFORE the economic crash, in 2007, the structural deficit was 3% of GDP – the 2nd highest in the G7 and among highest in the 26 countries of the OECD.
  • The national debt had risen 43% to 500 billion in 2008 on the eve of the crash.
  • As the country lurched into recession in 2008, the IFS (Institute for Fiscal Studies) said “We are entering the current recession with one of the largest structural deficits in the industrial world and debt levels larger than most industrial countries.”
  • The 2008 crash saw the onset of the deepest recession in British history. More was lost from GDP in the final two years of Labour government than during the Great Depression.

Benn initially disputed the figures, then tried to change the subject when Neil informed him that the figures were from the official Red Book figures of Gordon Brown’s treasury.

So, Labour and its apologists can stop blaming the banks. No doubt, the crash made things much worse, but the figures pre-crash speak for themselves.

Benn’s only defence (and it’s arguably a reasonable defence) was that the Labour government at the time was spending to invest in schools, hospitals, and public works. He couldn’t deny over-spending, but in essence was stating that the money had been well spent. It’s a legitimate point of view.

However, I got the feeling last night that Cameron’s message to stay the course to recovery resonated more with the audience and the post-Question Time polls seemed to confirm that. There was a sense that a Labour government would once again embark on a spending spree to buy their way to broad sunlit, economic uplands.

Labour may have been spending money well, but they were over-spending rather than building up a surplus during the years of growth and they were doing so on borrowed money.

A more cynical person might say “It’s easy to be popular when you’re buying drinks for everyone.”, but to continue this analogy, it’s not really fair to leave it to your guests, or worse still, your guests’ children, to pick up the tab.