Mediamacro Myth 2: Labour Profligacy

As I noted inwards my previous post, the real large authorities budget deficit inwards 2010 was largely the effect of the recession. That fact is hard to foursquare amongst the myth that the coalition authorities rescued the economic scheme from an impending financial crisis, together with thus it is of import to force about other explanation for the large deficit: that it reflected the profligacy of the previous government.

Economic journalists know sum good this is a myth. Yet it is a myth repeated on countless occasions past times the coalition parties, together with past times journalists working for the partisan press. On i occasion i of these journalists tried to rubbish a post service where I wrote it was a myth, together with I promise learnt to regret the experience.

Just inspecting the nautical chart inwards my lastly post service shows this myth is nonsense. But the political commentators that are key to mediamacro seldom await at economical data. What they produce retrieve of the pre-recession budgets of Gordon Brown was about criticism that he was non existence equally prudent equally he powerfulness be. That retention is both right (both the IFS together with NIESR made that criticism) together with the criticism is valid, equally I ready out inwards my study of this period. (To read the report complimentary earlier the election, acquire here.) This is the half-truth that sustains the myth.

But mild imprudence is non profligacy. We tin sack run across that past times looking at about other chart, for the debt to gross domestic product ratio. Profligacy would imply a apace ascent ratio, only this ratio earlier the recession (37% inwards 2008) was below the degree Labour inherited (42% inwards 1997), together with below its financial dominion figure of 40%. No profligacy there.

So the Labour profligacy declaration on its ain would autumn apart, if it was non itself buttressed past times about other myth: the declaration that the authorities should accept been running large surpluses inwards 2007, because nosotros were inwards the midst of a major boom. That myth is of import together with widespread plenty to deserve a post service of its ain tomorrow.

One concluding point. There was no impending financial crisis inwards 2010, only in that place was a real existent financial collapse inwards 2008. Even though Labour was non profligate, if it had been to a greater extent than prudent wouldn't that accept given it to a greater extent than ammunition to handle the recession caused past times the financial collapse? To the extent that Labour's countercyclical financial policy inwards 2009 was moderated past times a worry nearly debt (which I suspect it was), this is a half-truth. But equally Vicky Pryce, Andy Ross together with Peter Unwin nation inwards their majority 'Its the Economy Stupid: Economics for Voters' (which I happily recommend, together with which inwards its initial chapters covers much of the solid soil of this series):

"The elimination of the UK's structural deficit [under Labour earlier the recession] would non accept been fifty-fifty a sticking plaster inwards the human face upward of the haemorrhaging of the finance sector's jugular"

I would too add together that the Conservatives non solely argued for fifty-fifty less financial rule earlier the financial collapse, only opposed Labour's measures to moderate the recession inwards 2009.

Previous posts inwards this series

(0) UK mediamacro myths: an introduction

(1) 2010 Great Britain faced a financial crisis