Debt, Deficit, and Deceit: How Labour Caused the Crash and the Conservatives Saved Us

An election is coming, and we want to make sure we're in safe hands, don't we?

In advance of the General Election, it's prudent to take into account the past history of parties with government experience and look at their track record. Let's start with what we 'know'.

• The exiting Labour government left us in massive debt, with a huge debt following a policy of borrow and spend.
• Coalition and Conservative austerity has brought down the deficit as promised in successive election campaigns.

Those facts form the basis of much Conservative support. It is assumed that Labour will borrow billions and send us spiralling back into deficit. We've all seen the matter raised in the commons and on the news. We don't even need to look at Conservative campaign material to see that this is the truth; Labour caused the economy to crash and the Conservatives are cleaning up their mess. The Conservatives are taking us from deficit to surplus.

Right?

Well, the subject of debt and deficit is not that simple. Many people confuse the two. In fact even David Cameron, while in power, spoke of bringing down national debt when he actually meant deficit. So what are debt and deficit?

Debt

• Money borrowed. Often stated as net debt, being the money borrowed minus the value of assets. It's what the government owes.

Deficit

• The difference between budget income and outgoings. Deficit happens when income is less than outgoings. Surplus happens when income is greater than outgoings.

So in terms of debt, what is the track record of current and previous governments? 

To say the Conservative record is 'poor' would be an understatement. The current Conservative government have increased debt and debt as a percentage of GDP by quite dramatic amounts. They are borrowing in far greater amounts than Labour, which is all well and good in some respects as it provides us with income... until those debts are called in. Then we have one awfully big expense to pay off. That's extremely risky. 

Borrowing is not always a bad thing. Sometimes it is necessary, but it is a calculated risk, one the Conservative government is willing to put far bigger bets on than Labour ever did, and they are gambling with our economy. Not only is it risky because debts can be called in, but huge national debt can also slow economic growth as its lessens likelihood of other investment. It's a two pronged risk which the Conservatives are taking with apparently little concern.

However, this behaviour is nothing new to the Conservatives. It follows previous trends.

The last Labour government brought down debt as a percentage of GDP from that during the term of the exiting Conservative government. Under the Conservative led coalition, this rose sharply, surpassing even the previous levels under the previous Conservative government.

Source: Daily Mail, referencing ONS

In fact, here we can see exactly which party's policies lead to increased borrowing. Under Labour, borrowing as a percentage of GDP dropped to its lowest level in the two decades shown, while Conservative/Coalition governments have been blighted by vast amounts of borrowing compared as a percentage of GDP.

Source: Daily Mail, referencing ONS

Now, lets look at some current public sector debt data... This speaks for itself. We're still up to the eyeballs in debt.

Source: Office of National Statistics

OK, the debt's looking unhealthy, but what about deficit? That's coming down, right?

Well, yes, it is, but it would have done even without Conservative austerity because the huge deficit left in the wake of the global economic downturn was something of an anomaly. It didn't cause the downturn as many would like to imply, but rather it was a response too the downturn. The Labour government who were in power at the time were faced with the prospect of our financial industry collapsing. If the banks failed, they would wipe out savings. They would also have call in debts, including mortgages, loans, etc. The economy would have bombed ever worse than it did, and so the government bailed out the banks. That is what the huge expenditure was about. It wasn't reckless investment or unwise borrowing, it was an attempt to save our economy from the affects of a GLOBAL (rather than UK/Labour caused) downturn. It was a response, not a cause, and therefore an anomaly. 

So if we discount the deficit caused by the economic crash, how does Labour's track record stack up compared to the Conservatives?

When Labour came into power, the Conservative government left them with a deficit. The Labour government brought this into surplus where it remained for four consecutive years, longer than the previous and short lived Conservative surplus which preceded a Conservative deficit which was greater than Labour's at the height of their pre-crash bail-out spending. In fact, in recent decades, Labour have had us in surplus for a greater length of time than any Conservative government has managed, that is despite the Conservatives being in government for far more of the time.  The Conservatives had plenty of time to prove their policies were financially sound, but it was only under labour we had any substantial surplus. Even the later Later deficit was coming down again - under Labour... until the global crash.

Source: The Guardian

So how is the deficit doing now?

Source: BBC News, referencing ONS (annotation added).

It's come down, but not at the speed promised. Under Conservative election pledges, we should've been back in surplus by now. We aren't near. We have gotten back to a deficit equivalent to that before the crash, but we're no where near in surplus. That reduction in deficit has been paid for through austerity measures, cuts in funding to the national health services, education, welfare, and so on, while being somewhat slowed by tax breaks given to the wealthiest members of society and corporations. In other words, the reduction in the deficit is being funded by the poorest members of society and the working class, while big business continue to increase profits and the wealthy continue to hoard wealth - keeping it out of circulation and therefore slowing economic growth.

But who cares who paid to get the deficit down? It doesn't matter, right? At least it's down, so the Conservatives have done a good job?

That would be a rather narrow view. The previous Labour government took us from deficit to surplus without austerity and without reaching the deficit of the previous  Conservatives at its worst.  As much as I resent giving a thumbs up to Blair's government, they did a good job. They took us from deficit to surplus without the NHS going into free fall and without workers relying on food banks. They did so without the disabled committing suicide rather than losing their homes due to lost benefits. The did so, without spitting on the poor by giving tax breaks to the wealthy.

Now, some economists say that surplus is bad, that it takes money out of circulation and causes economic crashes. However, Labour's surplus bucks that trend. They balanced the Tory books, paid off Tory debts, and then started investing while keeping debt at a stable level as a percentage of GDP. Even in Labours second year, investment was up on the previous Tory governments final year, then it dropped for a year, then it went back up, and Labour managed to invest without causing debt to rise as a percentage of GDP. The Tory government have severely cut investment while dramatically increasing debt as a percentage of GDP. In other words, they pose greater risk to the economy.

Labour did a good job. The Conservative legacy is less positive.

Yes, the deficit is down almost to what it was before the global downturn, but at what cost? The NHS is on the brink of collapse. Food banks are back. National debt and the associated risk has risen dramatically. The government is hiding reports indicating that their strangle hold on welfare is costing lives. Meanwhile, they can't even account properly for election spending (battle buses) never mind the economy. On top of that, they have sold off national assets for less than they were worth to corporations in which they or their friends have interests. We now have a huge amount of debt and far fewer assets to balance it with. But sure, the deficit is down compared to at the height of the crash...

That the number of working families in poverty has increased shouldn't matter, should it?

That the number of children in poverty has increased shouldn't matter, should it?

That the NHS is collapsing shouldn't matter, should it?

That funding to mental health services has been cut to the point of crisis in the last seven years shouldn't matter, should it?

The fact student debt isn't being paid off because even the employed aren't earning enough to live, never mind pay off loans, shouldn't matter, should it?

The fact our disabled are being deprived of security shouldn't matter, should it?

It's all OK, because the current wealthy Prime Minister who went to university for free, with her supportive and wealthy husband who has interests in a company which is getting away with not paying full UK task is bringing down the deficit...

We all have the national debt around our necks, and the Conservative government is increasing that debt. As far as track records go, the Tory government has spent a far greater percentage of the time in office in deficit over the last few decades than Labour. And they too left a deficit as an outgoing government in '97, without being in the midst of a global downturn. 

• Labour did not cause the crash, but they did act to prevent it becoming worse than it was.
• Labour has a better record of surplus than the Conservatives.
• The Conservatives are bringing down the deficit at great cost to the poor and working class.
• The Conservatives are giving tax breaks to the wealthy and selling off public assets.
• The Conservatives are increasing national debt.

The Conservative government is carrying out a two pronged attack of economic growth, first by running up huge debts, and second by reducing investment in infrastructure. Both slow economic growth and while yes, the deficit is down, that doesn't actually benefit economic growth and therefore isn't a long term policy. It's also a bit of a fluke, and however you look at it, they've failed to reach their targets. What we do know, is they are borrowing huge sums and gambling with the economy, and they aren't investing, meaning the majority have less access to services or financial security. The Tories have done far more damage in seven years than Labour did.

Incidentally, welfare can be regarded as positive investment because welfare money doesn't leave the economy. It is given to the poor who have to spend, so the money goes back to local businesses or goes towards items which then earn the government both VAT and income tax from the wages of those supplying goods. What doesn't benefit the economy is the rich getting richer. If a person's bank balance or worth is rising, then that money has been taken out of economic circulation. It slows the economy. Amassed wealth doesn't improve a countries economic stability, what it does do is create poverty.  Money is not infinite, to have the super rich there needs to be the super poor. The wealthy are not philanthropic investors providing jobs to working man, they are creators of poverty and class division in order to amass their own personal wealth which is outside of our economy.

You will see a lot of posts at the moment about how if the rich are attacked and taxed more they will remove investment... Will they? 

Well, no. They wont. Why? Because that's cutting their noses off to spite their face. Paying more tax lowers profit - that earned on top of expenses, and in addition to already amassed wealth. That's not to say it removes profit, it doesn't, it simply takes a very small percentage of it to give back to the poorest people in society, who then spend that money in businesses owned by the wealthy, so it still goes back into the 'pot'. It gives the wealthy a larger client base and promotes economic growth. The wealthy still make a profit and grow their personal wealth. It doesn't stop the wealthy becoming more wealthy, it simply slows that process down fractionally to make like better for the poorest members of society - the children, the sick, the elderly - while also ensuing economic growth. Withdrawing investment as a response to higher taxes would mean yes, the wealthy would keep the money they have, but they would no longer be investing to increase their profits. No investment, no return. No investment, potential for profit decreases. No investment, and the wealthy stop getting wealthier. Everyone ends up worse off. And if the economy crashes because the wealthy don't invest? Well, thanks to Tory debt, I doubt we'd be bailing out the banks a second time, so who's savings will vanish as the banks collapse? Well it isn't the savings of the poor because they don't have any savings. It would be the savings of the wealthy. The poor would suffer immeasurably, but currently wealthy people would also go bankrupt. It seems a rather silly risk to take, because of a 10% tax increase on earnings over what most of us could dream of earning anyway. 

Also, the past proves that taxing the rich doesn't cause economic gloom. Labour increased tax on wealthy earners while keeping debt at a stable level compared to GDP. Investment didn't stagnate under them. People were investing and the economy was the strongest it had been in years before the global economic crash. The current Tory legacy on the other hand, is one of tax cuts for the rich, low investment, rising debt, and economic uncertainty.

Oh, but if you're still worried about a tax hike on the wealthy, Labour's proposed tax rate is still less than it was for nine of Thatcher's eleven years is office, until her chancellor cut it, close to the end of Maggie's popularity and while causing her concern. So when you hear people claim that taxing the wealthy is 'politics of envy' or 'communist', ask yourself this, was Thatcher practising the politics of envy or was she a closet communist? Well it's not the latter, as she was openly anti-communist (as most of us are). The former also seems unlikely, she wasn't really in a position to envy the wealthy who kept her in power and have granted her an almost saint like position among politicians. If anything, her legacy was a standard Tory legacy of high debt as a percentage of GDP and securing the wealth of the already wealthy while child poverty remained high. She was neither envious, nor communist. Nor was she philanthropic.

It actually provides a more stable economy to tax the wealthy a little more to keep the poor afloat - after all, it's the poor who are renting from the wealthy landlords and paying for whatever they have to sell or are invested in. Lowering tax on the wealthy while creating massive amounts of poverty and debt leaves us in a position of economic uncertainty, failing public services, and rising child poverty, alongside rising rates of homelessness, suicide, food bank use, and preventable deaths of the elderly due to lack of heating and social care.

Conclusion? If you care about national debt, the NHS, education, the disabled, the impoverished, or even just getting the taxes due, then vote for Labour, because the Conservatives are playing Russian roulette with national debt and systematically destroying our public services, while also increasing national and child poverty.

Please note that I have used a range of sources from the Daily Fail Mail, to what I'm told is the 'twisted lefty' Guardian, as well as the not so impartial BBC and going straight to the sources with the Office of National Statistics. I've done so specifically to show how the figures remain the same across a range of sources. These aren't biased, labour leftist statements, they are facts and figures I'm giving you to draw conclusions from, alongside my own thoughts. What you do with that information is up to you.

But I'm team #VoteLabour.

Carmine Raven