Ed Milliband and the Caucasian Kettle
January 6, 2011
It’s clear that Ed Milliband has decided to take Coalition accusations of Labour’s economic incompetence head-on. He’s recognised this incompetence (sorry, perceived incompetence) is his party’s biggest challenge. And so, he’s claimed that the Coalition is promulgating a deceit:
“What is this deceit? It is that the deficit was caused by chronic overspending rather than a global financial crisis that resulted in recession and a calamitous collapse in tax revenues. One pound in every five of corporation tax disappeared in 2009-10. Their deceit ignores the evidence from around the world that a global credit crunch caused deficits to rise on every continent. The US and Japan face deficits of the same scale and for the same reason.”
There’s so much deceit in this paragraph that it’s difficult to know where to begin. For example, the argument that there’s only one cause to the deficit is not one that anyone’s making. Secondly, the magnitude of the deficit would be significantly less if Labour had not been running a deficit before the recession. Here’s a graph, courtesy of the ONS, with the deficit on the left and debt on the right:
Even this conceals the true picture, as it’s in percentage rather than absolute terms – and the economy shrunk over this period. The deficit in 2006 was a record £8.7bn, before the financial crisis. By November 2009, this had climbed to £14bn. The growth in percentage terms was more driven by the relative decline of the economy than the Government’s response to the financial crisis. Labour left us in a terrible state to weather the financial storm – and fully deserve their reputation for economic incompetence. Don’t forget that they were predicting in 2006 that by this year we’d have a surplus of £14bn.