Global financial crisis caused economic crash
However, my letter was misprinted. What I actually intended to say was he should keep “my opinions to himself”. I objected to him presuming to know how I, as a Labour Party member, felt about things just now. Just so there is no ambiguity, I welcome his opinions, not least because they are widely, if mistakenly held, and deserve an answer.
He claims Labour caused the crash. However, the truth is that a global financial crisis in every country caused the crash. This caused a 7% drop in income in this country, stopped short by Gordon Brown’s bailing out of the banks, but only at the cost of turning a bankers’ deficit in to ours. I repeat, the bankers’ crash caused the deficit; high spending did not cause the crash.
The deficit grew from a low level quite fast due to a drop in tax income, a fall in production and an increase in benefits as people lost their jobs, not due to high public spending on health or public services. Spending was relatively low in 2007, and our current Chancellor George Osborne promised to match it penny for penny just before the crash.
The only argument I have heard that Gordon Brown was wrong to prevent a total collapse is from the left of the Labour Party who argued for the nationalisation of the banks. But the current government parties had no better suggestions at that time and I really do believe the Tories would have let unemployment go much higher as happened in the 1930s.
As Mervyn King, then Governor of the Bank of England, said to the Treasury Select Committee in 2011: “The billions spent bailing out the banks and the need for public spending cuts were the fault of the financial services sector.” So why do so many people still blame Labour? Labour adopted a dignified silence and left the Con-Dems to get on with it. Instead of improving matters, the new Government simply repeated at every public opportunity: “Labour [are] to blame”.
Yet the deficit remains and worst cuts are yet to come. We do need to sort it out, but not by squeezing the poor and working people in general, but by securing real and balanced growth, the benefits of which are spread to everyone.