Thursday 20 October 2011

Why Labour are right - and always were - on the Economy

As an ordinary lass with a basic armchair grasp of economics, the biggest mystery to me is just how totally the coalition managed to take hold of the economic argument.

Let's backtrack. All going fairly well during the ten years before the credit crunch. Lower deficits, higher surpluses, steadier interest rates and inflation than under the previous Tory government.

2008 - Credit Crunch. Not just here, but all around the developed world. Starting with the sub-prime mortgage collapse in the US, we all know just how horribly our banks crashed and that America, the EU states and others were all just as badly affected as we were. Our dependence on the financial markets left us more exposed than some, but by the end of 2009, though a mixture of stimulus and all-time-low interest rates, the UK posted the following growth figures :

In the 3 months to February 2010 the U.K. economy grew by 0.4%.
In Q2 of 2010 the economy grew by 1.2% the fastest rate of growth in 9 years.
In Q3 of 2010 figures released showed the UK economy grew by 0.8%; this was the fastest Q3 growth in 10 years.

-The UK economy was growing at an annualised rate of 4.4% - the fastest rate of any EU country - when Osborne took over.
-The deficit fell by over 20 billion in the same period, largely because of this strong growth.

It wasn't coincidence. Schemes to support the property market and car industry kept the economy ticking over, while mortgage protection schemes kept home owners afloat and business schemes stopped businesses folding.

Then, by the end of 2010, we started to see the impact of Osborne at the treasury and his austerity disaster. As stimulus was stripped away, VAT hit ordinary people right in the pocket and cuts started to bite, growth drifted away.

There has been no growth at all for 9 months. Since the end of 2010 (Q4). This would be painful enough, but with inflation recently reaching 5.2%, and average yearly cuts to services of 6%, it feels disastrous to ordinary people trying to make ends meet.

Go back to the leaders debates in early 2010. Gordon Brown warns over and over again that cutting too soon, removing stimulus before the economy has recovered and raising VAT would be disastrous for our country and so it has proved.

Bravely, despite current perceived wisdom and Tory chants of "the mess Labour left" Ed Balls has stuck to the original message : Cuts this deep during a recession will only make things worse.

And so it proves. 

Both unemployment and inflation are at their highest levels since 1996 - the last time we had a Tory government. The deficit is NOT falling as Osborne tried to assure us it would and debt will rise by over 40 billion more than projected. The line "It's hurting but it's not working" get's truer by the day. Businesses are reporting disastrous growth figures, manufacturing is falling, retail figures are flat, and the welfare bill is rising - by over 12 billions - not going down. Nearly 1 million young people are out of work.

Osborne's powerful friends distance themselves more by the day. American newspapers report on "Cameron's failed austerity project", the IMF are calling for a plan B and growth forecasts have been downgraded over and over again by every major analyst. The figures originally suggested by the OBR look so embarrassing today that it's hard to see how they have any credibility at all.

So, for just how long are we going to let this carry on? Every quarter that passes consigns another swathe of voters to a future of worklessness and poverty.

Labour have a five point plan for growth. To say they have no alternative is simply more lies. It's worth listing them here :

-Abandon the disastrous rise in VAT from 17.5% to 20%. This would stimulate retail sales and put a little money back in people's pockets.

-A new levy on bankers bonuses to guarantee 100,000 jobs for young people and to build 25,000 affordable homes.

-Bring forward long-term investment projects covering schools, roads and transport. This would stimulate the construction industry

-Small businesses who take on extra staff to be given immediate tax cuts

-A one year, 5% VAT rate on home improvements. This would encourage spending on home improvements while the house sales market remains stagnant.

Conservatives will cry "You can't spend money in a debt crisis" but if that money pays for itself through tax flows and brings in extra cash, then we need to consider whether we can afford NOT to spend money in a debt crisis.

The Q3 growth figures are due out at any moment and don't look to hold any more cheer than the last 3 quarters. No doubt we will hear that they are "disappointing" from the coalition once again. They are way beyond disappointing, they are appalling.

Labour are right on the economy and Osborne is horribly, horribly wrong. We must continue to make our arguments for stimulus and support for the vulnerable as loudly and as clearly as we possibly can. The myth that "There is no alternative" gets more dangerous by the day.


  1. Sorry but Labour took us into this mess and to say it was America is rubbish, British banks got greedy saw a method of buying up sub prime debt and making money out of it. Remember a well known politician tell us the housing bubble would find it's own level and the housing bubble was exploding behind him, and again we hate people who are rich.

    Labour did not hardly make a job in the private sector they made them in the public sector, and sadly with massive debt comes cuts.

    Labour are right? no they are not they just use this to make us think they know what's best.

    But people will remember about welfare reforms lower benefits rises and Labour calling people on the dole or sickness as scroungers or work-shy, while making them selves a fortune.

    Labour are again looking like a mini Tory party

    and I've been in labour for 46 years

  2. Time for an ordinary lass to get herself some economic education. Try my stuff at also try the videos at and you'll begin to understand there are underlying problems neither Labour nor the Coalition are addressing as a party, though Douglas Carswell, Steve Baker and Austin Mitchell all know the score. You need to look at this stuff to get an understanding of what's really going on - the banks have run things for centuries. I'm still researching it all. Also read Treasure Islands by Nick Shaxson to understand the tax-dodging going on by Cameron's backers.


  3. Labour did not cause the economic mess Robert, it did start in the US and it was led by the banks there and then in the UK and Europe. That is the reality and how history will record it because it’s true.

    If Labour had not bailed out the banks there would not be a single person in the UK untouched. People’s savings big or small would have gone; business would have lost everything in their accounts except for the multi rich firms as they would have found ways to protect themselves. But for small and medium firms then their money would have gone.

    Wages would have gone unpaid, services and bills unpaid, you name a single aspect that did not include money and it all would have been lost.

    Labour kept the economy afloat and did the right thing for the country. It kept people in work through spending on public services. Something that was vital and right to do. The myth that Private Business did not flourish under Labour is untrue it did because it was they who provided the equipment, the IT knowledge and everything else to the public sector.

    The two are one of the same, spending money on essential services created a strong economy as it put money into the pockets of those who needed jobs. There was more fairness and equality as a result.

    The growth Labour left was real and was working, as Sue points out £20 billion was paid of the deficit yet people were not forced to endure massive cuts to achieve that. Labour were right and again history will show they were.

    The only point I will partly go along with is the party has been far too quiet on ESA and disability. There should be more leadership from the top on this and if not the party will find they have no choice as some stage to make a stand.

    It’s not backbench Labour MPs who do not want to speak out against Attos and ESA, it is some at the top who have brought into the lie that all welfare reform is right. Well that can change and must.

    But in terms of Labour and the economy if Labour were in office today it would be reality that we would still have growth in the economy and would not be cutting as deep as the Tories and Lib Dems are.

    The mess we is because of decisions the Tories have taken, it’s not the fault of Labour its 100% this Tory led government.

  4. Indeed. My friend is from Iceland. They had been saving for many years to buy a house and nearly had enough for the huge deposit required. They lost the lot.

  5. in 2009 labour's last year in power the uk economy contracted 4.9% then George Osborne took over

  6. Valiant Patrick Dickson - Erm, did you hear about that big recession like thingy that hit the whole world? Labour had turned it around - more successfully than any other EU state.

    Get a grip. Before it's too late.

  7. Who votes for the Conservatives – men or women?
    The facts may surprise you

  8. It is time ALL political parties came clean and stated the true facts that it was NOT the sick or disabled or old or unemployed or the NHS or even the hard working TAX payers who caused this horror but it is they who will pay for it.

  9. Well it does not matter who fault it is, it's whom you trust to get it right and I suspect the next thirty years we will see more and more hung parties, hung governments and hopefully labour can do a deal with the Tories to form a government in thirty or forty years.

    Oppositions best for a party which says we made a mistake with Welfare we did not go far enough or fast enough.....

  10. I think Labour made many errors in encouraging people to rely on the state, and I mean in terms of public-sector jobs not in terms of benefits to those who need them. They also tried to change too much with fire-control centres and NHS systems which have proved costly and ultimately worthless.

    However, I think that Conservative ideology about shrinking the state is causing many problems with the economy. You can't resort to austerity measures when you have no clear view of where growth is going to come from. The notion that the private sector would gather up the public sector has proved to be a cavalier assumption at best. I think cutting VAT in time for Christmas would allow shops to generate more wealth and contribute to a growth within the economy. It may not be much but it could be a start. Last year George Osborne blamed poor Q4 figures on the snow. If he's forced to blame the weather again this time then I'm pretty certain we're sunk.

  11. Too deep. Too fast. Too soon.

    I've never believed that absolutely nothing should be cut. Withdrawing from expensive international armed conflicts would have been a form of austerity I could agree with. Ending the Drugs War would have saved a huge amount in both money and lives. An across the board, once-off pay cut for all MPs would have not only saved some money but, perhaps more importantly, boosted morale.

    Tories and Labour both share blame in this, and time that politicians spend passing the buck is more wasted money and more services down the pan.

    On a slightly different note, economic growth is a myth perpetuated by capitalism. We live on a planet with limited resources. There is no growing room.

  12. So were Labour "always right" when they decided that following a neo-Thatcherite approach to regulating the banks was a good idea for the economy? Were they always right when they thought that running a deficit in the middle of a boom was acceptable? Were they always right when they thought it was a good idea to waste billions of public money on stuff like PFI while ignoring and trampling on the poor?

    Sorry Sue, I tend to agree with you, but on this you are dead wrong (IMO). I'm a strict Keynesian and that includes spending responsibly and regulating responsibly in the good times. Labour did neither. Labour doesn't have an economic philosophy - all it has is a mess based on the opinions of whoever's donating to it at the time.

  13. I didn't say they were always right on everything George - far from it.

    But I do firmly believe that once the crisis hit, they dealt with it in the right - the only - way. It was working and if we'd carried on with a Keynesian response to the crisis, the deficit would have continued to fall and cuts would not have had to be so draconian.

    The evidence piles up every day that the approach Labour had was right and that Osborne is flushing the UK down the toilet in almost every way possible.

  14. Labour may have been better than this bloody bullingdon lunatic asylum but Labour still favoured PFI initiatives ,most notably in the NHS,that have come to bite us on the backside.They never reversed the bank deregulation as they should.What about the Cooper crusade and Atos? She has a lot to answer for as far as people like us are concerned.What about the Murdoch cosy relationship.Mandi mandi madmyson and his machiavelian machinations.They were just as blue as the torys and for god sakes we have even go a blue labour faction .Bloody ell ....WE need a real and proper overhaul of the banking system .Yes capitalism and support for business..we need that but we dont need the 1% 99% imbalance. Corporate greed is rampant and its path made smooth by lobbying companies greasing that path for them by greasing the grubby palms of those we chose to elect and it has to stop. A fair finance system for a fair society .....

  15. Quote robert
    Labour are again looking like a mini Tory party
    and I've been in labour for 46 years

    After Michael foot who i knew well the labour party have indeed become a mini conservative party
    At this time thow there is very little if anything that separates them the same with the liberal party
    3 right wing conservatives parties in going forward i wish i was well enough to go and live in Libya that i do know
    3 right wing conservative party's in going forward sounds like a living hell and i should know having lived it for the past 30 years

  16. @Sue,

    But your post title said "Why Labour are right - and always were - on the Economy". I'm afraid they most certainly haven't always been right on the economy and, if we're honest, their current economic policy is simply disagreeing with what the government is doing whilst not proposing any actual alternatives themselves.

  17. I will never be able to afford a house in the village I was brought up in because they've all been bought by ex-civil-servants and retired council managers on *massive* final salary pensions.

    Just like the communists of an earlier era, looking after their own at the taxpayer's expense was always labour's economic legacy to us, and they can go to hell for it.

  18. now then George, you're splitting hairs. The post is clearly about the crunch/post crunch and the election time.

    I also listed 5 points for growth that personally, I think would be a pretty good start, so there's ya alternatives ;)

  19. There are times when I feel I have been born on the planet of the apes

  20. We will know in four years time if the Tories have it right or wrong, I suspect even if they get it wrong, I've a feeling the swing voters who make up the decision who will get into power, and the masses of people who will not vote, may well see another Hung Tory government, which could see a battle between the Labour party and the Liberals to see whom will go into coalition.

  21. Just like the communists of an earlier era, looking after their own at the taxpayer's expense was always labour's economic legacy to us, and they can go to hell for it.

    I pay tax over £2800 per year so I can assure you labour giving me very little or the other tax payers.

  22. In fairness Sue, I tend to agree with you in principle and I don't want to split hairs. But I'm afraid I can't really agree with most of your 5 points.

    1. I sympathise with somewhat but I do know that if VAT was lowered then that would have to be paid for by cutting spending elsewhere.

    2. The money a bonus tax would raise has variously been used by Labour to pay for the following proposals: cutting the VAT rate, funding sure start centres, providing 100,00 jobs for young people, building new homes, cutting the VAT rate on home improvements to 5% and to fund tax cuts for small businesses. I'm afraid that the money raised by such a tax would probably pay for one of the above, but not all of them.

    3. The government is already doing this.

    4. The government tried this with it's NI holiday for small businesses. Only a couple of dozen made use of this.

    5. Fair enough.

    My main objection to Labour so far is that none of their proposals have details to explain how they would be paid for and, even if they could pay for them, none of them amount to much more than tinkering around the edges.

    If I were Labour I'd be calling for stuff like a full blown Keynesian programme to boost growth and erode the deficit, for the mutualisation of failed banks, for a new pan-european Tobin Tax, for renegotiating PFI contracts, for regional stock exchanges and for a dozen other detailed, costed proposals to boost growth and bring down the deficit.

    So far all I've seen is pussyfooting around.

  23. Wow, what a pathetic attempt to paper over labours disastrous legacy.

    You're a labour shill, nothing more.

  24. It was interesting reading the comments but people still seem to fall for the I,m Labour I,m Tory.
    Labour 1st starting bailing the banks out sorry they played at the casino let them go bust you blow your months wages at the casino is Milliband/Cameron going to bail you out hmmm I don,t think so.
    Its time we had a Government for the people a Government thats going to print its own money and lend it out with no interest payments.
    Why do they have to go to the banks in the 1st place and borrow money then pay interest on it.
    The government doesn,t lose because it comes into power with no money of its own in the 1st place its your money.

  25. Just read this makes me want to cry. Ive been home since august 2011, after 24 yrs of being raised in arabia...i just cant believe my eyes. so many people begg to come to the uk and yet soo many locals are suffering. Im shaking my head hard as i write this with tears rolling down my face. All i can think of is the poor innocent people who need dire help and are not getting it. What on earth is the government playing at i ask myself. I dont know much about british politics to be honest but i can see with such figures that something terrible is going on. Who do we believe ?

  26. The five points labour put forward would obviously increase growth in the short term, but long term they merely increase the deficit. British households need to Deleverage and thegovernment needs to close the gap between income and expense. Given the global economic situation, this is always going to involve pain, putting it off will only increase the pain later on.

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