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Labour must refute Tory canard that profligate spending caused the recession

Once more in this last week Cameron and Osborne have been at it again saying all Britain’s current troubles come from ‘profligate’ expenditure by the last Labour government. It is a straightforward lie. In Labour’s years in office before the financial crash in 2008 the highest deficit in real terms was 3.3% of GDP in 2004-5. If this is supposed to be a mark of ‘profligate expenditure’, why on earth doesn’t Labour point out every time this is raised that by that measure Tory governments have been much more profligate than the Labour government ever was.

During the Thatcher/Major Tory years the deficit actually exceeded 3.3% of GDP in 10 out of those 18 years! If this is the measure of economic competence, then Labour comes out incomparably better than the Tories. Moreover, whilst Thatcher/Major ran deficits in 16 years out of their 18 and produced minor surpluses in only 2 years, Blair/Brown produced 4 years of surpluses. Nor are these facts just an academic matter. The Tory lies, ignoring these facts, are part of a relentless propaganda campaign to persuade the electorate that Labour wrecked the economy and is therefore ultimately responsible for all the austerity being imposed on the British people. It is not too much to say that if this enormous canard isn’t forcefully refuted, Labour could lose the election on a lie.

So if Labour didn’t wreck the economy, what did? It is too readily assumed it was the bankers’ bailout. In fact the buying of stakes in the banks (to the tune of £68bn) did not directly have an impact on the revenue budget and the deficit. What did have a huge impact on these was the dramatic drop in public tax revenues which was a direct result of the global financial crash and the consequent recession.

In the 5-6 years leading up to 2007-8 there was a remarkably consistent straight line trend in public revenues of about 6% a year, i.e. real growth plus inflation. That public income in 2007-8 was £549bn. Based on this trend, any reasonable forecast would have predicted further increases in income in the next 2 years, leading to a predicted income of about £620bn in 2009-10. But as a direct result of the global financial crash and the consequent recession, actual public income was only £512bn in 2009-10.

That massive loss of public tax revenues of around £110bn was the key cause of the deficit, not excessive expenditure. The Tory sound-bites about ‘profligate expenditure’ before the crash are just fanciful inventions designed to undermine Labour’e economic credibility. A simple examination of the deficit figures each year in the decade to 2007-8 exposes them for what they are – a Goebbels-sized lie which needs to be stamped on and eradicated by every Labour spokesman, especially Ed Balls.


  1. Mark1957 says:

    This has become more and more worrisome to me as time has gone on.

    Do some part strategists really believe that ignoring this is helpful. It is the entire basis for Labour worst polling, that on economic competence.

    It is time this was spiked and clear and simple answers to the various form of this lie need to be formulated, preferably backed up by official government figure, and repeated as often as the lie is.

    If not Labour will not regain trust on the economy and that could be disastrous…

  2. Chris Smith says:

    I have to very much second the point made by Mark1957 in his comment. So many people seem to believe the Tory lie simply because they hear it so often. It seems to have been part of Tory policy since at least 2010 for it to be repeated at every opportunity by every one of their ministers and MPs – and something which is shamefully echoed by their Libdem hangers on. The only way to counter this is for Labour spokespeople to call it what it is – A DAMN LIE – whenever the chance arises, with the figures to hand to back this up, as Mark1957 recommends. Only then will the non political public be startled enough to realise what has been happening.

    Why has the Labour Party allowed the Tories to get away with it fo so long?

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