The UK budget deficit: links to proper facts & informed opinion

[Alf Bentley]

I'm no great admirer of the last Labour government, but am getting sick of hearing people blame it for the budget deficit, when that was overwhelmingly caused by the financial crash, irresponsible lending (and borrowing), greedy bankers and complacent politicians worldwide (inc. UK politicians of both main parties) hand-in-glove with greedy major corporations.

The last Labour government deserves a portion of the blame (and criticism for other policies), but the idea that they mainly caused the deficit and supposed need for austerity politics is a downright lie, knowingly peddled by the Tories and their apologists - and swallowed by far too many.

Rather than rant, I want to provide some links to proper facts & informed opinion, for anyone who is interested in thinking, not just being partisan....and these certainly aren't pro-Labour commentators:

Figures showing UK budget deficit since 1980 (click to expand graph):

http://www.guardian.co.uk/news/datablog/2010/oct/18/deficit-debt-government-borrowing-data#zoomed-picture

So, we've run a deficit annually since 1980 except for 1988-89 (yuppie boom, pre-ERM crash) and 1998-2001 (1st Blair Govt). Before the crash (2002-2007) Labour ran a small deficit, bigger than Thatcher but smaller than Major...it only mushroomed when the global economy crashed into recession with the banking crisis in 2008

A report by Institute of Fiscal Studies (IFS) on Labour's handling of the economy (try the 1-page executive summary, unless you have a lot of time on your hands!): http://www.ifs.org.uk/bns/bn93.pdf

IFS is a respected, fairly independent body (Chote, an author of this report now runs Cameron's "Office for Budget Responsibility"), it isn't complimentary, but the problems are long-term:

Outstandingly clear and non-party-political explanation of the financial crisis and why it is still going on: http://www.guardian.co.uk/business/economics-blog/2012/aug/05/economic-crisis-myths-sustain

2 short blogs assessing whether the banks or Gordon Brown were to blame for the deficit:

http://blogs.independent.co.uk/2011/04/02/march-for-what-alternative/

http://blogs.independent.co.uk/2011/04/03/the-banks-did-cause-the-deficit/

The first one blames Brown for about 1/3 of the deficit (though points out that the Tories would have done the same). This is fair to an extent, in that Brown shouldn't have been running a deficit in a boom period...but it does ignore the fact that almost every other government had done likewise for the previous 25+ years - and that some of that spending was much-needed investment in early years childcare (esp. for the deprived), education, health, tax credits to make work pay etc. Yes, they should have funded more through tax and less through borrowing (& PFI rip-off schemes that future generations will be paying for) and some of that money was wasted (PFI, Iraq etc), but I'm old enough to remember leaking school roofs, interminable hospital waiting lists, £2.50-per-hour wages (1990s, not 1890s!) and no tax credits.

Labour can be criticised for many things, including running a small deficit - and, particularly, following the Tory example and helping deregulate the banking system - but without the global banking crisis, the UK budget would not have been in the mess that it is. It would have had serious structural flaws and long-term issues, but it is mainly deregulated private finance (including individuals, not just banks), not irresponsible public spending that is to blame!

I'll stop ranting/preaching now...sorry!

[leicsmac]

Excellent stuff, but the right-wingers on here may see the links to the Grauniad and Indy and just dismiss them out of hand without reading, pretty much the same way left-wingers dismiss any Daily Mail/Sun articles as absolute bollocks. This is notwithstanding that the aforementioned articles make for a damn good read.

Hopefully the IFS report (as that can't really be even accused of bias) will help convince some.

In any case, excellent post and adds a lot of clarity. I don't think I need add that I totally agree with you about who is to blame (and even in what quantity) for the current mess.

[Alf Bentley]

Excellent stuff, but the right-wingers on here may see the links to the Grauniad and Indy and just dismiss them out of hand without reading, pretty much the same way left-wingers dismiss any Daily Mail/Sun articles as absolute bollocks. This is notwithstanding that the aforementioned articles make for a damn good read.

Hopefully the IFS report (as that can't really be even accused of bias) will help convince some.

I'm sure you're right, Leicsmac. A lot of people, left and right, "know where they stand" and don't want to challenge themselves. Others (including some rightists on here) are prepared to challenge themselves and, as a lefty, I know that one of my favourite political commentators is Andrew Neill, who is more right than left, as he makes me think (and laugh!).

I mainly posted the first Guardian link simply because it had such a good graphic, showing deficit figures 1980 to now. Larry Elliott (2nd Guardian link) is a lefty, but a critic of both Labour & Tories - and mainly just an excellent economic commentator who writes with great clarity. Rentoul, the first Indy bloke is more right than left, I'd say; don't know the other bloke.

Anyway, I chose the links because they provided proper facts or analysis, not because I necessarily agreed with them 100%.

[MooseBreath]

"the vast majority of other leading industrial countries reduced their borrowing by more than the UK. And most also reduced their debt by more."

"Once again, the UK public finances have underperformed relative to comparable industrial countries."

"How much of the budget deficit was caused by having to bail out the banks... None of it"

"We should not have been running a deficit at all at the peak of the boom, from about 2002 onwards"

"the deterioration reflected excessive optimism in the government’s fiscal projections...Between 2002 and 2007, the Treasury’s initial forecasts for borrowing were consistently lower than borrowing actually turned out to be."

"this fall in public sector borrowing occurred during a period when most other industrial countries were doing much more to strengthen their public finances... the UK had... the third highest [deficit] among the G7 countries and the sixth highest among the 26 OECD countries... Furthermore, the UK saw only the 18th largest reduction in its structural budget...in other words, the vast majority of other OECD countries did more to strengthen their public finances during Labour’s first eleven years in office than Labour did in the UK."

"The story over the following two years (2008–09 and 2009–10) was of a worsening fiscal position... Furthermore, additional borrowing was undertaken in these years"

"the UK has experienced a worse deterioration in its fiscal position than many other industrialised countries."

"the UK is also expected (as shown in Figure 3.4) to see the third largest increase in government debt over this period, with only Ireland and Iceland experiencing a bigger deterioration. "

"the UK had the sixth highest level of structural borrowing in 2007, was set to experience the fifth largest weakening of its structural fiscal position between 2007 and 2010, and was set to have the highest level of structural borrowing in 2010"

"The Treasury estimated in Budget 2010 that, at then current market prices, the cost of the financial sector interventions (net of fees and other income) would be £6 billion. This would be a trivial increase in PSND, which is expected to reach £1,406 billion by the end of 2014–15"

"In 2008–09, the government borrowed a total of 6.7% of national income... This is the highest level of annual borrowing, as a share of national income, since the end of the Second World War."

Just a few quotes from your selected articles. It would not be difficult for me to find comparably credible articles which are even more damning in their assessment of how dreadful Labour's financial performance was.

[Guest MattP]

I'll have a read of this later but if it's going to be taken as a view from a non biased political angle surely we need the sources to be more central than the Guardian and the Independant?

[leicsmac]

I'll have a read of this later but if it's going to be taken as a view from a non biased political angle surely we need the sources to be more central than the Guardian and the Independant?

*Smug mode*

Told ya.

*Exit smug mode*

Is there actually a mass media (either newspaper or TV-based) that is actually central/doesn't have a political bias of some kind? I reckon independent think-tank reports and certain Internet blogs are about the closest you'd come.

Either way Matt the articles are worth a read, they're pretty even-handed, as can be shown by Moosey picking out his greatest hits just above. And the IFS report can be pretty much guaranteed to be reasonably central.

[Guest MattP]

I'll have a read later, I was just pointing it out.

[leicsmac]

I'll have a read later, I was just pointing it out.

I know I was just being smug and self-righteous.

[Alf Bentley]

Just thought that I'd bump my own post here, seeing as there's some outstanding links, possibly obscured by my bullshit...

Figures showing UK budget deficit since 1980 (click to expand graph):

http://www.guardian....#zoomed-picture

A report by Institute of Fiscal Studies (IFS) on Labour's handling of the economy (try the 1-page executive summary, unless you have a lot of time on your hands!): http://www.ifs.org.uk/bns/bn93.pdf

Outstandingly clear and non-party-political explanation of the financial crisis and why it is still going on: http://www.guardian....s-myths-sustain

2 short blogs assessing whether the banks or Gordon Brown were to blame for the deficit:

http://blogs.indepen...at-alternative/

http://blogs.indepen...se-the-deficit/