As we all know the UK economy suffered a huge 7.2% recession Q2-2008 until Q3-2009. This was caused by Gordon Brown’s mismanagement of the economy. Aided and abetted by Ed Balls. His worst mistakes were profligate and inefficient government spending, even when the economy was booming, making a complete mess of financial services regulations, allowing a huge property price bubble and unbalancing the economy away from manufacturing. Labour tried to blame the banks, when it was not the banks’ fault. The BBC have taken up this lie as a mantra to be repeated whenever possible. The banks are the good guys, they contribute enormously to the British economy and helped dig it out of Gordon Brown’s immense black hole.
The incredible success of the banks improves the quality of life of everyone in Britain. In 2013 UK financial services had a trade surplus of £61bn, enough money to build 100 large hospitals. They paid a total of £65bn in tax, including corporation tax of £6.5bn and employment taxes of £28.4bn. When you consider that the TOTAL income tax paid by EVERYONE in the UK is £160bn you can do some interesting maths. Basically without the tax paid by the financial services industry the rest of us would have to pay around 50% more income tax.
The bank “rescue” orchestrated by Brown was abysmal. Under capitalism the shareholders and bondholders pay for a management failure. Under Brown’s cronyism the state paid. A Scottish prime minister throwing (mainly) English taxpayer’s money at Scottish banks to save Scottish jobs. Look at Washington Mutual to see how it should have been done, with assets valued at $327.9 billion, that went bust in 2008 with capitalism sorting out the mess.
Also worth noting is that the headline figure bandied around for the bail out is £500 billion. Another lie. The RBS Group raised £5 billion in preference shares and £15 billion in ordinary shares. HBOS and Lloyds TSB together raised £17 billion, £8.5 billion in preference shares and £8.5 billion of ordinary shares. So £37 billion in total. An amount that was then a little over two weeks of the average spending for the UK government.
And Brown, far from solving the banking problem was actually instrumental in making it far worse. He vetoed Barclay’s proposed rescue of Lehman’s. “We don’t want US problems infecting the UK system” the US government was told. Lehman’s went bust and contagion on both sides of the Atlantic was the result. Labour do not, never have and never will understand business or economics, if they did they wouldn’t be socialists.
Ed Balls was Economic Secretary to the Treasury, from May 2006 till 27 Jun 2007 and had a major role in formulating Labour’s ridiculous economic policies that failed so badly.
Firstly let’s take a look at this academic paper, Extents and Limits of Monetary Reform under Gordon Brown. Here we find some interesting quotes:
“The 2008 crisis was that of credit. Credit had increased considerably in the preceding years: borrowers and lenders had relied on the growing housing prices to refinance their loans.”
“Accusations then multiplied against central banks for having maintained interest rates at too low a level and for too long a time after 11th September 2001.”
“So if Gordon Brown’s monetary framework is not at fault, the causes of the credit crisis and the deep recession that followed must be found elsewhere. Massive research has already evidenced financial deregulation; expansionary budget policies and the accumulation of debt; restricted social policies not providing enough automatic stabilizers; and insufficient industrial policies.”
“The responsibility for the financial crisis and its economic outcomes rather lies in the other-than-monetary policies Gordon Brown implemented in the fields of financial regulation and budget management on the one hand, and in the development of the liquidity trap phenomenon on the other hand.”
Secondly there is this brief article, Tony Blair, Gordon Brown and Ed Balls’ Economic Legacy, written by an author of economic books. And there are more interesting quotes:
“The new Labour project was fundamentally flawed economically.
It failed to recognise the supply performance issues that challenge the UK economy and the way that many of the central problems arose out of a ratio of public spending that is too high in relation to national income. New Labour’s rhetoric and fiscal rules honed by Gordon Brown with the help of Ed Balls were a mask for a new Keynesian agenda.
Higher public expenditure and higher government borrowing dressed up in words such as prudence that pretended they were something else. The fiscal rules far from being an effective restraint on public spending and government borrowing accommodated any level of government spending and the creation of a significant budget deficit when the economy was operating at the peak of the economic cycle and over heating. New Labour’s huge increase in government spending aggravated the British economy’s long-term structural supply-side challenge at a time when it was about to become more difficult to manage as China, Indian and other emerging economies become more competitive. The spending, taxation and regulation of New Labour made the traded goods and services sectors and the manufacturing sector in particular less internationally competitive. As well as seriously aggravating these long-term structural supply performance problems Gordon Brown created the conditions for the acute fiscal crisis that is now overlaying these structural supply performance matters.”
“Today the New Labour economic legacy is a fiscal crisis, a public sector that is too large and an economy that has been consuming beyond its productive capacity. Public spending was planned and increased in the context of an unrealistic judgment about the UK economy long-term trend rate of growth.”
“The economy’s capacity to supply was damaged by New Labour’s spending and taxation before the credit crunch. Labour attempts to improve labour supply through education and training in many respects represented a miss-specification of the problem and hindered rather than helped. The slump in output has exposed Britain’s supply-side and fiscal problems and it has also further reduced the economy’s productive capacity. ”
You must be beginning to notice a trend here! So let’s look at a third article, this time from the Tax Payer’s Alliance, Some quotes:
“This poor growth performance is driven by an increasing burden of government spending, Britain falling behind in cutting corporate tax and increasing regulation and tax complexity. Britain slipped from having the 5 th lowest corporate tax rate in the OECD to the 10th highest, out of 30.”
“Spending on a range of public services has increased substantially but the results have been poor. The trend in falling mortality amenable to healthcare has not improved, Britain has fallen down international education rankings, recorded crime has increased and Britain has the lowest ratio of motorway network to the number of cars of any major European economy.”
“The tax burden has increased by 51 per cent in real terms since 1997-98 as tax rates have increased and the thresholds for many taxes have not been increased in line with inflation. Real disposable incomes increased by an average of 3.2 per cent each year before Gordon Brown became Chancellor but have gone up by just 2.6 per cent in each year since.”
As you can see, three consistent resources telling the same story. And one utterly different to the lies trotted out endlessly by the BBC/Labour Party/Trade Unions/Guardian.
It was Gordon Brown who trashed the British economy, aided and abetted by Ed Balls. The great recession was not the fault of the banks. If you believed that before you had been lied to. If you still believe it then you have a problem with the proven facts.