We’re pretty much half-way through this government now, if their plan for a general election in 2015 holds (I know, I’d like to hope for the coalition to collapse in on itself and force an earlier election too, but that means relying on the Liberal Democrats to grow a conscience… it’s not going to happen, is it?)
So far they’ve put forward a number of deeply unpopular and quite honestly barbaric policies, all in the name of reducing the deficit. Most of these have been targeted at reducing the welfare bill (which is considerable), but it does mean that Osborne has decided to pay the deficit by cutting funds to those in our society who need it most.
No surprises there, then – that’s just basic Tory ideology.
However, as the deficit is the single defining characteristic of this government – the overriding reason for everything they do (or at least, so they claim) – it only seems fair to judge them on their economic performance:
This is a not inconsiderable amount of money.
Note that borrowing was up in the early 1990s (linked to a European economic crisis and rising UK inflation rates culminating in Black Wednesday), under John Major’s Conservative government.
Borrowing then started to drop in 1997, pretty much coinciding with the election of Tony Blair’s Labour government. Borrowing continued to drop until 2002/03, when it began to increase.
This rather unsurprisingly coincides with the build-up to and outbreak of the Iraq War.
A rather more noticeable spending increase occurs in 2008/09 (by which point Gordon Brown was leading a Labour government) which coincides with the collapse of the US housing market, and ultimately the global economic crisis we’re just starting to escape.
David Cameron’s Tory / LibDem coalition was elected in 2010, on a programme of austerity and deficit reduction. The austerity has definitely begun to bite – noting the massive cuts to public services, the near-privatisation of the NHS and sweeping cuts across the entire public sector – but note also that public borrowing is still increasing.
Perhaps a more useful descriptor of the deficit is to look at how much actual debt the UK has owed historically (as a percentage of GDP).
You can immediately see the massive spike in debt in the 1940s – right when our country was at its poorest, and we were spending the most (there was a war on…) – we can also see that debt has never come close to this level since (despite what various doomsayers would have us believe!).
We can see (by looking at the events alongside each debt spike) that national debt has much more to do with outside forces than anything else.
Our current recession is quite obviously nowhere near as serious as that of the 1920s/30s, nor are our current levels of borrowing anywhere near the heights required of us during the Second World War – but we can still see that borrowing rises when something else impacts our economy, and only drops significantly when this outside force loses significance.
In other words, British governments have historically borrowed more money as the economy weakened, and then repaid this national debt (repairing the economy in the process) when the outside forces are removed – partly because a weak economy is a poor time to save money, but mostly because it’s simply not possible to save money (and pay off the debt) when the economy is at its weakest – doing so simply weakens the economy even further!
One of the clearest examples of this is the post-war reconstruction and nationalisation (including the establishment of the NHS & an effective welfare state) embarked upon by Attlee’s government: this is probably one of the most ambitious spending programmes ever enacted in British history, and it took place at a time when (as we can see from the graph) borrowing & debt were already at an all-time high.
And yet borrowing fell dramatically, and continued to fall for the next few decades – primarily because the ultimate source of the debt (World War II) had gone (as a secondary point, Attlee’s public sector investment created jobs & massively stimulated the stagnant British economy; public sector spending stimulated private sector growth (and increased tax revenue!))
So What Do These Graphics Show?
Primarily that, contrary to Tory spin (and popular belief), the last Labour government didn’t “ruin the economy”; they initially repaired the debt accrued by Major’s Tory government, and increased spending only when outside forces demanded it.
We can certainly blame them for the Iraq War (which was expensive in more than just financial ways), but the Tories would have acted no differently.
We can’t blame Labour for the collapse of the Housing Market – we can wish they had done more to insure us against such a catastrophic financial meltdown, but even with 20/20 hindsight that would have been rather difficult.
What the previous Labour government did do was insulate its citizens, to some degree, from the effects of the financial crisis – rather than imposing austerity measures (which, as we can see do not work) & cutting public services, most of us were able to face a recession knowing that we didn’t also face food & fuel poverty, a lack of healthcare & even homelessness.
And we can see that, despite Osborne’s claims, our current government’s austerity measures are not making an impact on the debt – it’s still increasing (at almost the same rate), despite the global financial market’s tentative recovery.
We can’t expect any chancellor to repair the entire British economy in just two years. We can expect him to realise that the economy will take a long time to recover, and that his current plan is not working. Which is why it is not just disappointing, but actually terrifying to hear Osborne, Cameron et al refuse to even countenance any kind of economic ‘Plan B’, when we know his ‘Plan A’ boils down to cutting essential services to British citizens and hoping the economy will magically get better.
I don’t think this is because they believe their economic policy is a success. It isn’t, and every single descriptor points to its failure; they’d have to be morons to think it was working.
But it’s now becoming clear that the one thing more important to Cameron & Osborne than actually fixing the economy is refusing to admit that they are wrong.