Whenever anyone criticises the government for spending too much, for borrowing too much, for putting too much of our money into wayward banks, for hiring to many people into non jobs or for pledging too may spending projects for the future, they are told that every one of these decisions was crucial to see us through the recession. Without all this we are invited to believe that our worst recession since the 1930s would have been even worse.
The truth is these measures did not limit the downturn or cushion the fall. Their cack handed way of first helping pressurise the banks the banks then giving them too much support has simply allowed RBS and Lloyds to go on paying too many executives far too much money at our expense. It has not led to a good flow of much needed business finance to most of our private sector. It has not led to the timely reorganisation of those banks to make a competitive and lean banking sector. The recession which we were told was going to be a middle class recession for the south east – as if that made it alright – has turned out to be a savage industrial downturn for the midlands and north.
The reason we had such a bad dowturn is they followed a destructive monetary policy, choosing targets and interest rates that increased the damage and altering banking regulation from too loose to too tight at exactly the wrong point of the cycle. Spending so much and borrowing so much in the puboic sector has now led to even tighter money and higher interest rates for the private sector, making recovery more difficult.
Running the state sector in such an inefficient and expensive way does not boost the economy. It sandbags it. The productive sector has to pay the bills – in the short term through higher interest rates and in the longer term by higher taxes. Labour seem to think that putting so many people onto mega salaries in state subsidised banks, quangos, Councils and Whitehall will of itself create the extra demand the private sector needs. Instead that creates extra demand for imports, whilst a stressed private sector struggles for finance.
If the government’s case was right and all this public spending powered a recovery, surely £200 billion on with their money printing for public spending we should be well into recovery? If their policy was a good one, wouldn’t the UK have been first out, ahead of countries with better public spending control, instead of last out?
Today the issue is how Mr Brown behaves towards his civil servants. The bigger issue is why he has instructed them to so debauch the public accounts, that any recovery will be damaged by the need to raise too much money and the need to make very large adjustments to either spending or taxation to sort things out.
Labour’s one correct claim is that there have been fewer redundancies in the private sector than some forecast. As readers of this site will know, that is because there has been a big move from full time to part time working, especially in industry. Many workforces and managements have decided to share the pain by each taking less pay but keeping part of a job. That does not make it healthy or a happy private sector. Now the private sector want to know when the public sector is going to wake up to reality and realise the game is up for all these highly paid jobs which we cannot afford. Do they want work sharing and lower pay like the private sector, or a more conventional post cutting programme using natural wastage and voluntary redundancy to slim the numbers?