Tuesday, 5 May 2015
The myth of Labour's borrowing
I cannot understand why Ed Miliband is so feeble in his "defence" of Labour's borrowing record. Indeed, he fails to defend it at all (twice in the last week: in the "Leaders' TV Question Time" last Thursday, when David Dimbleby repeatedly badgered him "Did you borrow too much?" and yesterday on the Radio 4 "Today" programme, when he was harassed by John Humphries on the same topic).
Instead of robustly refuting this bit of Tory spin Miliband burbles on about new schools and hospitals built by PFI - a double error as PFIs are a costly nonsense and it is foolish to remind us of them.
Briefly, in their first few years in office Labour were determined to establish a reputation for financial probity and ran a budget surplus such that, by the time of the crash, the debt/GDP ratio was lower than that inherited from the Conservatives. ( A sixth form student at the time rather charmingly asked me if it were true that Gordon Brown had a girlfriend called Prudence.) As a result of the recession following the crash tax revenues fell and the deficit increased.
For fuller details see Oxford Professor Simon Wren-Lewis's blog for 22nd April,or simply accept his conclusion (23rdApril):
". . . if you cannot shake off that idea that Gordon Brown was profligate, one final set of figures. Between financial years 1979 to 1996 (the 18 years of Conservative government), the deficit averaged 3.2% of GDP. From 1997 to 2007 it was 1.3%. Now maybe the Conservatives were a bit unlucky with having two recessions on their watch, so the equivalent cyclically adjusted figures are 2.6% and 2.1%. One last time: Labour fiscal profligacy is as mythical as the unicorn."