Tory lie 1: Labour can’t be trusted with the Economy
This lie has really taken hold but public spending as a percentage of GDP was lower under the last Labour Government (37%) than it was under Thatcher (40%), John Major (38%), or the current Tory government (42%).
In fact, after a decade in power, the last Labour government had cut the deficit and cut the national debt making it the most prudent Government in modern times.
Granted, once the global financial meltdown occurred, public spending rose significantly as Labour fought to save the UK banks from collapse. It is worth noting that it still didn’t reach the high water mark of 1981-83.
If you believe the much repeated narrative that Labour can’t be trusted with the economy, first you should check out the data.
Tory lie 2: Labour destroyed the economy (in 2008) & left the country in a mess
The GLOBAL financial meltdown was caused by the collapse of the sub-prime mortgage market in the USA, causing a worldwide banking crisis. The meltdown happened as a result of high risk, complex financial products, undisclosed conflicts of interest, the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street.
All Governments suffered at the hands of the banking crisis, no matter how strong or weak. Yet, the UK was one of the quickest to recover. In reality, swift action from then PM Gordon Brown prevented the UK banks from collapsing along with some of their American counterparts and other national banks.
It is worth noting that in the UK, the Conservative Party supported further banking deregulation prior to the financial collapse.
Tory lie 3: More Public Spending will Cripple the Economy
Running an economy is not the same as running your piggy bank at home. It’s probably fair to say that most people can’t get to grips with the concept of national debt being quite different from personal debt.
There are economic principles, such as ‘the paradox of thrift’ whereby spending less during an economic recession (such as the austerity measures deployed by the Conservatives) leads to a fall in aggregate demand. Hence a reduction in economic growth. This implies that spending less actually damages the economy and growth.
Another economic principle, the multiplier effect, shows that spending is better thought of as an investment to a healthy economy. The multiplier effect refers to the increase in final income arising from any new injection of spending. So for example, for every pound the government spends on building projects, not only will that spend stimulate the economy in terms of creating jobs and spending, it is likely that the overall tax return from the money working its way around the economy can be more than the initial spend.
In fact, many economists believe that public spending is the best tool available to inject investment into the economy from the bottom up.
This theory is underlined by the fact that spending had to rise at the start of the last decade to correct the neglect that had gone before. New schools and hospitals were built and as spending increased, so did our national wealth. The economy grew every quarter for 11 successive years primarily under the Labour government.