Once More On Labour and The Deficit

Andy Burnham, on the Andrew Marr show today almost got it right. He correctly pointed out that the last Labour Government had not been profligate, as the Tory and Blairite lies proclaim. He stated, correctly, that the last Labour Government had run more and bigger budget surpluses (4, in 1998, 1999.2000, and 2001) in ten years, ahead of the global financial crisis, in 2008, than the Tories had run (just 2 in 1988 and 1989) in their whole 18 years in government. But, Burnham spoiled it by then saying that Labour had allowed deficits to run too high, in the period between 2004 and 2007, when they began to spend money to repair the damage that 18 years of Tory mismanagement, and lack of spending on the infrastructure, had caused.

Once again, the actual data refute that claim. The deficit to GDP ratios between 2004 and 2007 were as follows, 3.12, 3.34, 2.39, 2.55. That gives an average over these four years of 2.85%. It compares with the average deficit to GDP ratio of 1.57% for the whole period between 1997 to 2007. In other words, it reflects a significant increase in spending, compared with the earlier period of the Labour Government, not surprisingly because for half of that earlier period, Labour had been running a budget surplus! Even so, the figures show that even here the ratio was lower in the last two years, 2006 and 2007, than the first two, largely reflecting the growth in the economy, which itself could not be divorced from the effect of the increased public spending, particularly on capital projects, building hospitals, schools and so on.

But, even taking this highest period of spending, under the last Labour Government, it is still less than the average deficit to GDP ratio under the Thatcher and Major governments, between 1979-97, which amounted to 3.48%, which is a full 22% higher ratio for the Tories, during that period, than for Labour, during its highest ratio period, prior to 2008. But, if we are then to compare like with like, we should not compare Labour's worst period with the Tories average performance, but with their own worst 4 year periods also.

On that basis, we should look at Thatcher's performance in the four year period 1980-1983. This, in fact, was a period when Thatcher, under the influence of Frederick Hayek and others, was implementing her own policy of austerity, which drove up unemployment to 1930's levels once more, for the first time since the 1930's, and caused millions to take to the streets in the Peoples Marches for Jobs in 1981 and 1983. The deficit to GDP ratios, during those years, were – 4.29, 5.63, 2.63, 3.45. That gives an average ratio, for those four years, of 4%. That is a ratio that is a full 40% higher, under Thatcher's government, than under Labour, during their worst years.

If we take the similar worst period, for the Major Tory government, the situation is even worse. Its worst four year period was 1992-1995. The ratios, during those years, were – 6.4, 7.7, 6.55, 5.2. That gives an average, for this four year period, of 6.47%, or a full 127% higher ratio, under Major, than under Labour!

Its time that Labour representatives stopped allowing the Tories and Blairites to get away with their lies about Labour overspending that are are part of a deliberate strategy to create a narrative that Labour lost the election because they were too left-wing, and so could not obtain credibility on the economy. The idiocy of the Blairites was shown in another interview on Murnaghan this morning – yet another opportunity for the right wing media to foist another procession of Blairite hasbeens on to us – with Lord Adonis.

He seemed unaware of the irony that he was lauding the fact that Tony Blair had been the most successful Labour politician in a generation, whilst supporting the Tories' proposition that Labour lost the elections, in 2010 and 2015, because it was too left-wing and profligate. He seems totally oblivious to the fact that it was Tony Blair's government, after 2001, that was engaging in that spending that the Tories and Blairites now describe as profligacy! He also seems unaware of the fact that one reason that Blair was popular, during that period, was precisely because his government was spending money on building hospitals and schools, and providing local authorities with money to repair the infrastructure that the Tories had destroyed.

Now Adonis, in this interview, wants another Labour government to compound the mistakes that Blair's government actually did make. Its major mistake was to not reverse the crippling imposition of private debt that Thatcher and Major had caused by their economic model based upon low wages and easy credit. It was that, and the same policy adopted by Reagan, in the US, that was actually the real basis of the financial crisis in 2008. They both caused asset price bubbles to blow up in the bond, share and property markets. That is also the cause of workers pension schemes now being unaffordable and also of property being unaffordable for millions of British people.

But, rather than Adonis wanting to address this crippling limitation on the economy, in respect of property, he wants to extend it further, by adopting the same crazy policies of extending private debt even further that has been pursued by the Tories, in the last five years. His answer to the housing crisis, and the fact that millions of working and middle class people can no longer afford to buy a house, or to move up from their existing house to a better one, and that this same bubble in property prices has caused Housing Benefit payments to go through the roof, is not to take measures to burst that bubble, but to take measures that could only inflate it further!

Rather than a policy of building hundreds of thousands of council houses, to meet the needs of people who have no home, or who can only afford to rent, he sees the problem only in terms of the inability of people to own a house, and so wants, instead, to make it easier for people to get mortgages, thereby building up an additional mountain of private debt, increasing demand further, whilst doing nothing to increase supply, and so pushing prices even higher, so that it becomes even less possible for people to buy a house, makes rents go even higher, and thereby only exacerbates the need for even higher levels of private debt!

In fact, there was nothing that this supposed Labour thinker had to say that was in any sense different to what the Tories have to say. No wonder he wants the election of the Labour Leader to be thrown open to every Tom, Dick and Harry to vote in, rather than just Labour Party members. Perhaps he should go the whole hog and suggest that David Cameron himself could be a contender for the position, and that the whole Tory Party should have a vote – which, of course, they would if it was an open primary election!

Its time to rid ourselves of this insidious infection of our movement.