It is important to pause a moment in the election campaign and look at something which this blog finds rather shocking. All politicians exaggerate their own and their party’s performance and denigrate their opponents, especially their predecessors (you don’t want them back!), but I do not recall a previous case of calculated dishonesty designed to mislead voters. Yet this is what the endless mantra about Labour have left a disastrous deficit which the Tories are having to clear up.
The history of deficits in recent times is very different to the Tory version. There were big deficits in the Thatcher era which grew then reduced and became a small surplus in the early nineties. After the 1992 election came Black Wednesday and deficits went up and up before beginning to come down until the 1997 massacre of the Tories by Tony Blair. After Labour came to power it then went into surplus until after Blair’s 2001 victory, when Labour began a programme of infrastructure renewal. This pushed the gap upwards but it did not reach Thatcher/Major levels until the crash came in 2008. It then rose sharply because it had to, or the financial system would have imploded. It continued to rise sharply because of the twin effects of rising benefits through unemployment and falling tax receipts through the consequent economic slowdown, added to which was the huge cost of saving the banking system.
The crash was not the fault of Labour, nor could any government which allowed markets to run free have stopped it as the worldwide nature of the disaster demonstrates. There is no more enthusiastic political party in the world for a free market economy than the Thatcherite Tory party, the rump of which still drives the Conservatives today. The crash was caused by an uncontrolled housing bubble principally in the US, UK and Ireland providing a new investment derivative called bundled securitized mortgages and loans, which were traded at ludicrous valuations in volumes which defied imagination inflating balance sheets of banks worldwide until they became bigger than the economies of which there were a part. Eventually a liquidity crisis arose for which the solution was the sale of the valuable assets accumulated in trillions, not only in themselves but as bets on their future performance. At that point this mega asset pile was found to be worthless. The banks were bust.
The only part that Alistair Darling and Gordon Brown played was to react very fast when given one hundred and twenty minutes warning that the Royal Bank of Scotland Group, which includes the Nat West and Coutts among many others, was about to collapse. Had they not done so, it would have closed its doors and all the other banks would have gone down the next day. Then there really would have been no money for anybody for anything anywhere. To present an exceedingly complex chain of folly in which many hands worldwide were engaged, mostly active Tories and their allies, as all down to a simple Labour overspend is ludicrous. It is worse than that. It displays a degree of intellectual and factual dishonesty which seeks to take advantage of the lack of understanding by ordinary people of sophisticated financial structures. It is either economically illiterate or deliberately fraudulent and either way it should debar those who pedal it from power.
The historical graph below tells the story.
