It is fairly well established that one of the big economic mistakes of the last Labour Government in the UK was its addiction to overspending. With the exception of two years, the entire history of the Blair-Brown government saw deficits. Indeed the surpluses were largely generated by some early privatisations and the sale of radio frequency spectrum. When elected, public debt as a proportion of GDP was 41.9% in 1997, by 2002 economic growth had reduced that to 29.3% but the debt itself had not declined. This was entirely frittered away by Gordon Brown by 2009, with public debt up to 44.2% of GDP, and now predicted to climb to 69% of GDP by 2014. This ignores the massive off balance sheet debt of PFI (PPPs) and unfunded public sector pension debts for many firms, such as the Royal Mail.
In other words, whilst Labour spent its first time being frugal, after that it started spending up large.
The Adam Smith Institute explains the deficit situation (in nominal terms) since 2001. It shows a pattern of ever increasing overspending, with two years of easing of overspending as tax revenue took off.
Why does it matter now? Because the modest cuts implemented by the Conservative/Lib Dem coalition are creating an enormous gnashing of teeth and moans from those who are having to face not living off of other people's borrowed money so much. The cuts reduce government spending to the level they were in 2007, which is hardly enormous.
Of course it is understandable that Labour would oppose the government, and not by saying the cuts are too modest and tax rises are wrong, but by opposing cuts full stop. Labour believes in more government spending, it is back to its socialist roots.
However, the cuts are being sold to the public on the basis that Labour mismanaged the economy by overspending. This resonates with many voters who understand that when taxes are not enough to cover spending, that borrowing occurs and that constant overspending is unsustainable. So Labour needed to rewrite history, in this case to claim that the deficit was not Labour's fault, but due to a collapse in tax revenue, which is about blaming the banks.
So Red Ed wrote a column for the Times that does just that. He claims the Conservatives are lying about the budget deficit to justify a radical plan to cut the state (if only!), and that it is the same everywhere else. He who points the finger at deception is guilty of a complete fabrication himself.
The figures from Treasury show that tax revenue dropped for two years, but by 2010-11 had recovered to the level of three years previous. Hardly catastrophic. On top of that Labour had been overspending to the tune of at least £26 billion a year since 2003. Miliband is being deliberately evasive of these facts to save his credibility, and only the true believers will listen to his nonsense. He also talks nonsense in claiming no other developed country is undertaking such cuts, when it is obvious that Ireland, Greece and Iceland all are. Estonia, the latest member of the Eurozone has a budget deficit of only 1% of GDP and public debt at 7% of GDP. Given the UK's public debt is over 10x that proportionately, Miliband is simply wrong. He thinks Obama's overspending gets him off the hook.
The Adam Smith Institute summarises Miliband's deceit:
First, from 2000-01 and 2006-07, spending rose by 51 percent, while tax revenues only rose by 36 percent. Secondly, from 2006-07 to 2009-10 (which encompasses the crisis years), spending rose by 22 percent.
In other words, it isn't about tax. It isn't about bailing out the banks either, the debt from which is less than 5% of total public debt. That lie is trotted out by the left who oppose cuts, who prefer to blame bankers than their beloved Labour Party borrowing and spending as if it could continue forever.
So Ed Miliband claims the Conservatives are ignoring the collapse in tax revenue, which was actually modest, to rewrite history. In fact HE is rewriting history in claiming Labour was a great manager of the public accounts, and that the financial crisis (which had nothing to do with the growth in fiat money and government supported inflation of housing prices) is to blame entirely. The leftwing myth of government not being to blame. By contrast I don't believe the banks are blameless and I don't believe it was right to bail them out, so the left that thinks capitalism means taxpayers bearing losses is floating a strawman that true laissez-faire capitalists reject. Miliband further evades truth by saying neither Conservative and Liberal Democrat parties campaigned on spending cuts, which is true. However, had they done so, Labour would have engaged in grotesque scaremongering of the people who it has made dependent on the state.
Quite simply, Britain's economy has seen an ever increasing role for the state, as the last Conservative administration did less cutting than it is accused of (and the Major years were profligate), and Labour kept creating new bureaucracies and pouring good money after bad into the NHS, plus greatly advancing the welfare state.
British taxpayers are unwilling to pay more, so cuts need to be made. The Conservative/Lib Dem coalition at best is freezing the growth of the state and the growth in public debt. GDP growth will shrink this modestly, but it is not radical. It is taking a breather.
And sorry Labour, you are to blame. You are the problem, your philosophy, your belief that people should not be responsible for their own lives, your belief that other people owe people a living and that other people's money is yours. What is more disgusting is your willingness to lie and evade the facts - in government you supported overspending and more government dependency. Labour wants people dependent on government to feed, house, clothe, education, medicate and move them - for without that dependency, why would they ever want the Labour Party?