I was listening to Radio 4 this evening on the way home. They were interviewing a couple of council leaders about cuts to council tax benefits. It was all a little frustrating listening to it, but what was particularly annoying was the head of West Oxfordshire Council (which include David Cameron’s constituency) parroting the typical Tory phrase that cuts were unavoidable given the 13 years of Labour overspending and excessive borrowing.
I find this really frustrating because what we’re going through now is not a consequence of overspending by Labour from 1997 to 2010. It’s really because of excessive risk taking in the financial sector that required a taxpayer bailout in 2008 and has lead to increased unemployment, reduced tax revenues and increased spending to cover the resulting increase in benefit costs. Below is a figure from Economics.help. The data is from the HM Treasury and, although I haven’t checked it, appears to be the same as what I have found before. When Labour took over in 1997 UK debt was 40% of GDP. It dropped to about 30% over the next few years. They then increased it from 30% to about 37% from about 2000 to 2007. The big jump occurs in 2008, when the financial crisis started. It seems, to me at least, that Labour was spending quite sensibly for most of their 13 years. There were many other things that weren’t sensible (de-regulating the banks for example) but to claim that there was 13 years of overspending and excessive borrowing is just, in my opinion, wrong.
You can also look at the actual deficit (i.e., how much the government had to borrow). The figure below is from the Guardian and shows the annual deficit in pounds since 1980. For the first few years, Labour ran a surplus. They then ran a deficit that, until 2008, never exceeded 3% of GDP. If you add up the values, Labour borrowed about £180 billion between 1997 and 2007. Even so, in 2007 public debt as a percentage of GDP was still lower than when Labour took over from the Tories in 1997.
Now, I should make it clear that I don’t think the Labour years were particularly good. I think they moved too far to the right and probably had policies that would have been similar to those of a Conservative government. However, to claim that our current crisis is a consequence of 13 years of overspending and excessive borrowing by Labour is being extremely economical with the truth. I think we should be doing our best to not let people get away these kind of statements.