No one believes that Gordon Brown or the Labour party created the recession of 2008. It is a farcical claim. A crash that happened across the northern hemisphere and led to the worst economic recession since the Thirties was obviously not made in Downing Street.
The simplest Google search brings up this:
“The financial crisis of 2007 to 2008 occurred because we failed to constrain the financial system’s creation of private credit and money.” Lord Adair Turner, speaking as chair of the Financial Services Authority, 6 February 2013
In other words, too much money – or credit – was created by banks, pushing up house prices and increasing speculation on “casino” financial markets. When finally it became apparent – with the collapse of Lehman Brothers – that this economy was a house of cards, the system collapsed leaving the state to save the banks and the stable public sector to prop up the unstable private sector.
The figures are astonishing. The government bailed the banks out to the tune of £123.93bn, and at its peak had liabilities for the banking crisis of £1.2tn. According to Professor Desmond, formerly dean of Social sciences at Sussex and treasury adviser now retired, the true economic cost of the banking crisis was between 11 and 13 per cent of GDP.
Despite these truths, the Conservatives peddle day-in and day-out the myth that Labour failed, that it was responsible for the recession and to boot that profligacy in the public sector was the main cause.
But instead of rebutting this tissue of lies, Labour talks of safer issues – the NHS and cost of living. The public, not to mention party members, look on in disbelief as the two Eds take punch after punch on the ropes but look the other way.
Labour will win despite everything – if they get their core vote out. But those core voters – and others – want to hear how Labour answers the charge of economic incompetence. They want to hear that they can hold their head high and say ‘yes, Labour made mistakes but they got a great many economic decisions right and delivered a prolonged period of economic growth and real improvements to public services’. (Does anyone actually remember the NHS pre-1997?).
Yes, Labour should have regulated the financial services sector much better, was too much in thrall to the cash cow the City had become, and was guilty of believing its own rhetoric about the end of boom and bust. But the Conservatives called for an even lighter touch on the banks.
The time has come for Labour to put the record straight. After returning to the limelight to save the United Kingdom, Gordon Brown is the man to tell the truth about what he did right and where he got things wrong over 13 years as first Chancellor and then Prime Minister.
There is a need to accept mistakes and, more importantly, that Labour has learnt from them. But there is a need to say unequivocally it was the private sector that failed – and the public sector that bailed it out, making the deficit, already reduced by revenues lost in the recession, so much bigger. As a Fabian pamphlet I helped write made clear, before the recession took hold, the public deficit in 2007 was 2.4 per cent of GDP, actually lower than the 30-year average up to 1997.
Ed did not forget the deficit in his speech – it was implicit in every cautious proposal, for example the slim increase in NHS funding. But he did forget to rebut the easy lie that Labour made the record deficit, for which the poor and those employed by the public sector are being so grievously and unfairly punished. Now is the time for a concerted push back. Together – to coin a phrase – Ed and Gordon could set the record straight and bolster Labour’s chances of a clear cut victory on 7 May.
Steve Barwick is senior policy consultant at Connect Communications, former adviser to Margaret Beckett MP (pre-1997), and former director of strategy at the North-west Regional Assembly/Leaders Board (pre-2011). He is writing in a personal capacity.
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