Economic crashes and changes of government

The Conservative party presided over membership of the Exchange Rate Mechanism which caused a damaging recession. This policy was recommended by Labour, the Lib Dems and the CBI, but it was a Conservative government that wrongly undertook it. Once the damage it had done was clear the Conservatives slumped in the polls to around 30% and were unable to win a General election for the ensuing 18 years. Many other issues were blamed for Conservatives lack of success in subsequent elections, but it was the economic mistake which did the damage and which the Conservatives fought to overcome without success until 2015.People were still raising the issue of the high interest rates the ERM caused on the doorsteps in 2005 and 2010. What most people want from a government is policies that allow or assist rising living standards for them and their families.

Labour presided over the banking crash and large slump which followed in 2007-10. Conservatives and Lib Dems had warned against the excessive build up in credit prior to the crash. Labour so far has been out of office for 5 years since the catastrophe, which caused a bigger and deeper recession than the ERM. Labour needs to re-examine how and why it got it wrong in 2005-10 and show it has learnt the right lessons from that experience. Voters will still be raising with them the Great Recession of 2008-9 in 2020, just as they did in 2015.

History suggests the main opposition party only gets another chance to govern when the party in government damages the economy sufficiently, as Labour did in 1968-70 (devaluation crisis), Conservatives in 1974 (coal strike crisis), Labour in 1979 (winter of discontent following trip to IMF and recession), Conservatives in 1997 (Exchange Rate Mechanism recession of early 90s) and Labour in 2010 (Great recession and banking crash).

An opposition party can reduce its problem and get closer to power by making the right apology for past mistakes and showing it has learned from the bitter experience. The narrower the gap, the smaller the error of the government before the Opposition has a real chance of winning. Claiming the crash of 2007-10 was all the fault of the bankers, or that it was an international crash which the UK government could not avoid is not going to wash. The Conservatives rightly could not get away with saying the ERM was a multi party and establishment policy so they should not be uniquely blamed for it. If something happens when you are in government the public rightly expects you to take action to stop it or alleviate it. In the case of the economy voters know that there are external events that you cannot avoid, but they also know that a government has plenty of powers that can make a difference. In the case of rigging the exchange rate or failing to regulate banks properly, they know those were bad decisions by incumbent governments.

Labour needs to accept that

1. It spent and borrowed too much in the public sector prior to the crash, with PFI and other off balance sheet financings adding to the excess borrowing (e.g. Network Rail).
2. It set up a new system of financial regulation in 1997 which failed to rein in excessive credit prior to 2007, so both public and private sectors were borrowing too much.
3. It then with its regulators made the worse error of revealing the weakness of the banks without helping them fix their illiquidity, bringing the whole banking system close to collapse. It should have held secret talks to get the banks to recapitalise themselves, whilst supplying short term loans against security.
4. Only after it had damaged the banks did it make the liquidity available that the banks needed.
5. It wrongly invested in RBS at too high a share price without demanding the changes and reforms needed.

Once it has understood that far from “saving the world” Labour compounded its errors it can get on with thinking through a future economic policy that could enhance the prosperity of UK people.
The fact that the USA and parts of the EU made similar errors in regulating banks does mean this was a “global crisis”.The crisis in the UK that was the fault of the UK government and regulators.


  1. Mrs Rita Webb
    August 17, 2015

    Yeah but what has Osborne done about tightening up Labour’s “light touch” regulation? Your fellow FT columnist Gary Silverman wrote a piece two weeks ago, stating that if anything, the City still remains a honeypot for those who cannot seem to operate their businesses under the gaze of the regulators on Wall St.

  2. Ralph Musgrave
    August 17, 2015

    According to Simon Wren-Lewis (Oxford economics prof), the idea that Labour spent and borrowed too much is a myth. As for the idea that bank regulation under Labour was deficient, obviously (with the benefit of hindsight) that’s true. But the idea that the Conservatives, who get loads of dosh from the bank industry, would have done any different is pie in the sky.

    Reply Conservatives would not have changed the regulatory system, removing powers from the Bank of England, as Labour did. The run up to the crash saw a turf war between Mr Brown’s competing regulators which got in the way of taking action.

    1. Frank Salmon
      August 17, 2015

      Many economists are left wing politicians and educators. Even Keynes would have argued that counter-cyclical fiscal policies were necessary during the ‘boom’ period.

      1. petermartin2001
        August 17, 2015

        Counter cyclical fiscal policies only mean running a govt surplus in the special case that the external trade is balanced and the savings pattern of the economy is overall balanced too.

        If its it deficit the overall govt balance has to be in deficit, on average over the cycle, if its in surplus the overall balance has to be on average in surplus too.

        1. Edward2
          August 18, 2015

          This odd theory links internal Govt deficits to import trade deficits with little correlation I can make out.
          The State doesnt pay for imports
          As long as money supply is sufficient there is no problem paying.
          And many big importers based in the UK are foreign multi national companies who pay from their world HQs in dollars.

          1. petermartin2001
            August 18, 2015


            You might want to look up the twin deficits hypothesis.

            I’d argue its more than just a hypothesis – it’s simply arithmetic. For example, if any country has a continuous trade deficit it must mean that more money is leaving that country than entering it. If there’s no compensating flows of money back into the economy of that country, then we have what we see in Greece.

            On the other hand if the flows are there, as they are in the UK and USA, there’s no real problem – except that our thinking there is a problem can be a real problem!

          2. Edward2
            August 18, 2015

            But if a company imports parts assembles a product and sells it to its home market and employs people and makes a profit where is the deficit?
            It is simple arithmetic as you say.
            Linking two things that have little in common in my opinion.
            States produce deficits or surpluses.
            Consumers and companies create import or export surpluses or deficits.
            There is no connection in terms of payments.

          3. petermartin2001
            August 18, 2015


            Lets consider a simple economy of 1000 people who elect a government a start a currency. The government starts it off by giving everyone a sample of 1 crown

            We can define the situation as (-1000,1000,0)

            Where the parameter above is (Government Surplus, Domestic Surplus, Overseas Surplus)

            We can then have 200 of those crowns spent overseas. That would be a trade deficit.
            We then have (-1000,800, 200)
            Note how it all adds to zero.

            We can play around with this concept. We can have the government hand out paid work, we can have more export and import transactions, we can have loans, we can even create money if we count that as a liability to the issuer and an asset to the holder.

            Whatever we do everything has to still add to zero.

          4. Edward2
            August 19, 2015

            Your theory may appear feasable when reduced to a carefully constructed small fable, but set it in the trading world of many billions of people and hundreds of nations I have my doubts its more than a potential mathematical correlation.

          5. Edward2
            August 19, 2015

            Your fable assumes a fixed money supply of just the original state issue.
            And no bartering.
            And no natural resources being discovered which are then able to be sold abroad
            And a closed economy with no alternative currencies like todays dollar or gold available for use.
            And no immigration with newcomers bringing wealth with them
            And so on…

        2. petermartin2001
          August 19, 2015


          “Your fable assumes a fixed money supply of just the original state issue “

          No. Any sector can create money as it wishes. But as all money is an asset/liability pair its creation still means the equation adds to zero.

          “And no bartering”
          Bartering is allowed. That doesn’t change anything. Neither do any of your other points. Resources sold abroad are just exports. The economy isn’t closed. “Overseas” includes just about everything else. Immigration and population increases are allowed too.

          I should point out that we are just referring to the £. The Americans can have a similar model for their dollar.

          1. Edward2
            August 19, 2015

            It appears you must be right Peter
            I do not understand why all do not just follow you to the promised land.
            All we need to do, correct me if I am wrong, is to print, borrow and spend as much as our trade deficit is and all we will fine.
            Growth employment and wealth will be ours.
            I wish I knew this theory when I was running a company because it would have made my life so much easier.

          2. petermartin2001
            August 19, 2015

            I only run a small company but it doesn’t make it any easier at all!

            The point is that our understanding of economics is largely conditioned by how we conduct our own affairs. We can’t spend more than we earn, unless we borrow and then we have to pay interest on those borrowings etc etc.

            The problem arises when we apply this thinking to government. Government isn’t like us. We earn money first and spend it later. Logically it must be the opposite way around for Govt. If the Govt didn’t spend money into existence first there wouldn’t be any to tax later.

            I don’t believe its that difficult to understand. It just needs a bit of lateral thinking.

          3. Edward2
            August 20, 2015

            But that is not what the State does.
            It taxes us and spends this money.
            Or that is what it should do.
            It is us that creates the wealth not the State.
            The most you could say the State does is to place orders on the private sector.
            It is only in the recent neo keynesian world of logic that the State has grown to such as size that it perpetually borrows and prints and wastes money in order to bribe gullible voters some treats to get elected.

            By your logic we could all survive happily by having no private sector at all.
            We could all work for the state with them continually borrowing and printing money or “spending money into existence” as you quaintly put it.
            Keeping us wealthy for ever by simply balancing the import bill by endless state borrowing printing and spending.
            Is it called the magic money tree theory?

    2. James Sutherland
      August 17, 2015

      “According to Simon Wren-Lewis (Oxford economics prof), the idea that Labour spent and borrowed too much is a myth.”

      They were running a deficit even during boom times, which is surely as close as it gets to being a dictionary definition of “spending too much”; meanwhile, even after nearly a decade of tax hikes and “draconian spending cuts” the government is still spending beyond its means. If that wasn’t spending “too much”, what on earth would be?!

      “As for the idea that bank regulation under Labour was deficient, obviously (with the benefit of hindsight) that’s true. But the idea that the Conservatives, who get loads of dosh from the bank industry, would have done any different is pie in the sky.”

      The problem was not the *amount* of regulation, as if it were some commodity you purchase by the tonne, but its structure: Brown fragmented regulation among multiple agencies, so no entity had overall responsibility or understanding of the market in the way the pre-Brown Bank of England did, which was a key part of the scenario which culminated in the bank runs and collapses. (It is worth asking what the new government has done to reverse this restructuring, though: how many of these powers and responsibilities have been transferred back to the BoE?)

      1. petermartin2001
        August 17, 2015

        “They were running a deficit even during boom times, which is surely as close as it gets to being a dictionary definition of “spending too much”

        Not at all. The government’s deficit is dependent on the sectoral balances in the rest of the economy.

        The effect of too much spending, whether from government or elsewhere, is to be seen when inflation becomes unacceptably high.

        1. Edward2
          August 18, 2015

          Is there much inflation in Greece or Venezuela?

          1. petermartin2001
            August 18, 2015

            Greece doesn’t have its own currency. So its inflation rate (very low) has to be the same as the EZ as a whole.
            Venezuela does have its own currency and a big inflation problem. It allowed itself to become too dependent on oil revenues. The amount of spending now is too high, both by Govt and the private sector, for what the rest of the economy can provide. Inflation is the rationing mechanism.

          2. Edward2
            August 18, 2015

            Created in Venezuela by overspending by a too large State.
            Sucking limited resources away from the productive private sector and impoverishing its people.
            My point entirely.
            I said Greece because it has been restricted in not having a floating currency and the ability to control its own economy.

          3. petermartin2001
            August 19, 2015


            Any economy, whatever the respective and relative sizes of the government and private sectors, would have a problem if it depended almost exclusively on the export of a single commodity to raise revenue and that revenue was adversely affected by a price collapse.

            Any monetarised economy, whether it be a socialist based or capitalist based, has to be run on sensible lines. Money, in either case is only worth what it will buy. If there isn’t anything to buy then we’ll have hyper- inflation.

            The hyperinflation in Zimbabwe was caused by experienced farmers being thrown off their farms and replaced by inexperienced farmers who didn’t know what they were doing. Production collapsed. Inflation isn’t just about too much money. It’s also about too little production. So if putting extra money into the economy can lead to more production there need not be any increased inflation.

          4. Edward2
            August 19, 2015

            You have an interesting take on the failure of the Zimbabwe economy
            Its all the fault of farmers.
            Nothing to do with the overuse of the state printing press or a corrupt Government or too high taxes or the break down of law order and the rights of citizens to own freehold land.
            Come on Peter get real.

          5. petermartin2001
            August 19, 2015

            To say it’s ALL the fault of anyone in particular in Zimbabwe is to greatly oversimplify the issue. The point I’d make about all hyperinflations that are commonly referenced is that they occurred in a post war situation when the productive capability of those economies was severely reduced.

            The best known is the hyperinflation of the Weimar Republic in the 20’s. Then there’s Austria, Hungary, China and others which have all suffered from hyperinflation at some point which you might want to look up if you’re interested.

            So while we might argue that Govt policy in all these cases was far from optimal, the idea that Govts at certain times just take leave of their senses and switch on the printing presses and decide to create banknotes of zillions, of whatever currency they are using, to save them the cost of paper isn’t quite right either. We do need to look at the “too few goods aspect” of inflation as well as the “too much money”.

          6. Edward2
            August 20, 2015

            I didnt say that Peter.
            According to you no level of state deficit is too large unless inflation is happening.
            I think your kind of economic policies are why many countries are in the mess they are in today.
            I am just pointing out that inflation is like a drug and it is very diffcult to control as many over spending states have found.
            I dont suppose you would consider the reason productivity in the countries you mention was ruined because of the damaging taxation and economic policies of a huge and grasping state in the first place

  3. Antisthenes
    August 17, 2015

    The greatest threat to the world today is socialism and religious extremism(they have much in common). The benefit, entitlement and envy culture that socialism fosters as Mises predicted is dangerously destabilising and attracts the less able and the hard of thinking. Hence the incompetent, authoritarian and muddled thinking of left wingers that leads to bad left wing governments always. Of course Conservative governments get it wrong but that is not because of ideology but because of human error. Labour get it wrong on both counts so it’s inevitable that when they leave government the country is always be worse off than when they entered it.

    As much as I dislike Tony Blair he did have the right idea on how to pay for socialism possibly taking a leaf out of the Scandinavian’s book. He saw that socialism is not a wealth creator in fact it devours wealth so he encouraged wealth creators to be the paymasters. So in some ways he really was a Tory. However Blair was hampered by Gordon Brown and other hard of thinking money tree believers lefties who got rid of him and trashed the country once again.

    Corbyn is the right person to lead the Labour party at least the true agenda of all lefties from pinkos to Marxist will be in plain sight and not hidden as it is now being sneaked in surreptitiously or under a different guise when the opportunity arises.

    1. Mitchel
      August 17, 2015

      Re Blair…”he encouraged wealth creators to be the paymasters”. How true that is…although possibly not in the way you intended!Many of Blair’s “wealth creators” became rich on the back of public sector contracts (IT,outsourcing,etc) which frequently haven’t delivered value for money.We have the National Debt that we have partly due to this.

    2. Mitchel
      August 17, 2015

      Funnily enough,I regard Corbyn,the old-fashioned Marxist,as a much less sinister character than Gordon Brown who has long struck me as a Trotsky-lite globalist.His speech yesterday,for instance,talking of a “worldwide aliance that could deal with poverty,inequality,climate change and financial instability” might sound unobjectionable but when you think about it is actually a call for an imposed global socialist governance/government.

  4. Mrs Rita Webb
    August 17, 2015

    Your argument also fails to mention that the Conservatives kept losing elections from 1997 onwards because of the poor quality of leadership. Since 2010 it’s difficult to decide whether it’s improved marginally or the dross put up by Labour even made Cameron look competent and that’s how he got into No 10.

  5. alan jutson
    August 17, 2015

    It was not just the ERM crisis and high interest rates which lost you the election back in 1997 John.

    It was the never ending sleaze and lack of self control of your Parties politicians, which was the last straw for many, as it was seen as a Party which was out of control, and its leader powerless or clueless about what to do about it.

    A certain Mr Blair looked to many like an alternative and perhaps a breath of fresh air.
    What a failure that turned out to be, with general the financial and expenses fiasco from many Mp’s, and the never ending spinning (lies to many of us) on a whole range of policies.

    The general public can, and often do forgive genuine mistakes, what they cannot stand is duplicity and self serving politicians.
    Thus Cameron and Osbourne need to be very careful about attempting to pull the wool over our eyes with regards to re-negotiation with the EU, because voters will cut off their nose even if it will spoil their faces, if they feel they have been lied to.
    Perhaps Mr Cameron understands this, and perhaps just perhaps, that is why he feels he will not stand at the next general election.

    A poor performing politician can perhaps learn to do better with good advice, a politician who is seen to be self serving or who is economic with the truth too often, has no hope.

    1. A different Simon
      August 17, 2015

      I had not thought of the significance of Cameron’s announcement of not standing for a third term .

      He could well be gearing up for the big betrayal .

      Cameron , Osborne and Boris were all born with a silver spoon in their mouth , enjoyed money is no object educations , got to Oxford (not sure how Cameron or Osborne managed that) .

      When you get a critical mass of these people in any one place , be it the Bullingdon Club or the Cabinet , they become overbearing .

      It only requires one of these members of an exclusive minority to fall from grace for the public to turn on them all .

      Who was it who said that hubris gets them all in the end ?

      1. Boudicca
        August 17, 2015

        I don’t doubt for one minute that the timing of Cameron’s going is governed by the EU Referendum. And when he has sold his soul and our country to the EU, he will no doubt collect his 30 pieces of silver.

    2. outsider
      August 17, 2015

      Well said Alan. Of course Mr Redwood’s analysis is basically right but there are many other factors in determining elections, including the corrupt mental state that comes from being in power too long.
      The Conservatives should have lost the 1992 election; the 1979 Government had clearly passed the end of its natural life. Under Mr Major, the recession, brought by bad monetary policy, exacerbated and prolonged by joining the ERM at an unsustainable rate, was in full swing well before the election.
      Labour somehow failed to win because of Mr Kinnock’s failings and also because Labour, by then riding the EU bandwagon, had to support continuing ERM membership rather than condemn Mr Major for joining it.
      Tired before it started, the Major Government was bad on many fronts, as Mr Redwood well realised even before he left it and challenged it. By the end it seemed to court unpopularity, for instance by closing most coal mines and bringing privatisation of Railtrack forward by 18 months. Add more sleaze and no wonder most of us could not wait to see the back of it in 1997.
      Labour had run out of puff by 2005 and might have lost that election. But the Conservative Opposition had taken too long to rethink and had backed Mr Blair over Iraq, taking out the issue that should perhaps have dominated the election.
      With fixed 5 year Parliaments, two-term Governments will probably become the norm, as in the USA. But that presupposes that, as Mr Redwood says, Oppositions use their first term out to hold up their hands to their mistakes, clean themselves of sleaze and dishonest spin and rethink the policies needed to meet their aims.

  6. Lifelogic
    August 17, 2015

    Your analysis above is spot on in all respects.

    I would add that it was indeed the ERM economic mistake which destroyed the party for 3+ terms. Whatever people thought of the Tories they had a reputation for being better with the economy than Labour (not hard I agree). Major destroyed even that that by taking us in to the ERM as chancellor. It was a predictable disaster and was indeed predicted by sensible people everywhere. Worse still he failed to come out efficiently, even when it was perfectly clear he needed to. This because of group think and that no one could bare to admit their huge mistake. In this respect it is rather similar to the green crap warming exaggeration religion now. To much has been invested in propagating the exaggeration to the country by the schools, EU, government, met office and BBC so they continue to drivel.
    Or rather switch it to “extreme events” rather than warming (as there is non).

    Furthermore having been evicted from the mechanism at great cost Major failed to admit the mistake or apologise (even to this day) and remained an EUphile to his very core. He did not even change his chancellor until far, far too late. Worse still he changed Lamont to Ken Clark.

    The EUphile dominated/lefty/wet Tory party even kept Major (a total lame duck and bound to lose the election) in office until he finally was dragged from office by the voters. How anyone with such patently limited abilities could ever have been made leader of the party in the first place is surely a refection on the poor general quality of MPs they had and still have.

    1. Lifelogic
      August 17, 2015

      A look at the list of past Chancellor since Barber makes very depressing reading indeed. We had:

      98% income tax & the ERM Denis Healey
      Super wet EUphile Howe,
      Lawson (shadow the DM & double MIRAS property bubble (and causes to Prof Alan Walters to resign)
      Major 15% + interest rates endless homes pointlessly repossessed, lives and businesses destroyed and not even an apology.
      Lamont’s total failure to leave the ERM gracefully and failed even to resign in the aftermath.
      Ken Clarke – Almost always totally wrong on every issue he pronounces on.
      Brown – “No return to boom and bust”, incompetent tax borrow and waste, incompetent bank regulation and incompetent bank rescue.
      Osborne – essentially a bloated government, command economy, EUphile socialist at heart. Pushing absurdly complex and absurdly high taxes. Also exporting jobs with high energy prices by design (though rowing back on this a bit now than goodness).

      What a dire list. Lamont and Lawson do seem at least to have learned some lessons.
      So many mistakes were made and nearly all were entirely predictable by anyone sensible such Alan Walters, JR, M Freidman, P Minford.

      1. Vanessa
        August 17, 2015

        You forgot to mention Brown’s belief that he “had saved the world” as well as all the other sh…t!!

      2. Gary
        August 17, 2015

        and the lesson is ? get the govt out of the market, they don’t know what they’re doing !

        Even the best, wealthiest private investors cannot predict the market with anymore than about 66% success, and the only reason they make money is because they can be nimble and cut losses. The govt has no skills for this, they have no incentive for this, at best they just blunder along squandering, at worst helping themselves.

        Not even the BoE can predict the economy. I cannot remember when they last guessed correctly

        1. A different Simon
          August 17, 2015

          When Govts are wrong they go into denial and continue in that mode until they are pushing against a piece of string .

          Over the past 20 years , political risk has become the biggest investment risk in The West . Winners and losers are routinely decided by the bureaucracy .

          When you can no longer invest in a business on the basis of fundamentals I think that is a sign that cronyism is the order of the day .

      3. Richard1
        August 17, 2015

        That is somewhat unfair on Howe & Lawson at least. True there were errors inc especially the ERM, but they did take the 98% tax down to 40%, and simplified the tax system with abolitions of taxes etc (a process which has unfortunately reversed under Brown and Osborne). Even Ken Clarke had a good innings as Chancellor – bequeathing non-inflationary growth and a budget heading for balance to the incompetent and hubristic Brown who of course wrecked the economy.

  7. Richard1
    August 17, 2015

    Excellently put. labour cannot escape blame for the over spending and crash of their time in office. It is incredible that 3 of the 4 candidates for the Labour leadership are still in denial on this and propose to continue to blame anyone but the Labour govt for the disaster. I suppose the positive thing is it makes it very unlikely any of them would win an election.

  8. agricola
    August 17, 2015

    Your piece today suggests that as an electorate we have had a capacity over the years of landing ourselves with a bunch of incompetent politicians. You could be right. It would seem that they nearly all “Have a dream” which invariably becomes a nightmare as in the EU and Euro. Perhaps we should choose our politician with as much care as we choose our doctors, most of whom are well qualified and practiced at what they do.

  9. Margaret Brandreth-J
    August 17, 2015

    When they begin to say ‘The fault was mine’ if only to themselves then we are making progress. There is wriggle room and somersault room as far as blame is concerned. The back flips of the previous governments has not let the voters know whether they were on their hands or their heels.
    As far as the NHS is concerned I cannot get over the reasons why so many of our young talented Doctors had to look for jobs in other countries, relatives of mine included, whilst we paid thousands of pounds a week to each Dr from overseas in the community to take on GP work which Nurses were doing for a few hundred pounds and still had to take the responsibility. The management ethic was terribly misguided and relied on preconception of status rather than competence.

    1. alan jutson
      August 17, 2015


      I have to agree with your comment about our trained doctors having to go abroad whilst we imported doctors and nurses, and still do.

      Seemed like madness at the time, still does.

      Still cannot understand why we cannot set up training to meet the demand here, in an area which should not be difficult to forecast.

    2. libertarian
      August 17, 2015

      Margaret Brandreth-J

      You ask a very good question “why do our talented Doctors seek to work abroad”

      Easy, the NHS is rubbish, it is badly managed, is not patient focused and has very poor health outcomes. There are many more taxpayer funded healthcare systems in the world that are far better, offering the chance to practice medicine properly and to grown one’s skills and expertise.

    3. forthurst
      August 17, 2015

      “As far as the NHS is concerned I cannot get over the reasons why so many of our young talented Doctors had to look for jobs in other countries, relatives of mine included, whilst we paid thousands of pounds a week to each Dr from overseas in the community to take on GP work…”

      Margaret: is this still happening? Who exactly (roles) were blocking our home trained doctors from practicing in our country and what do you believe are the motivation(s) behind it?

  10. formula57
    August 17, 2015

    Any fool can apologize, and many do in this era of form over substance in personal conduct. Actions are what counts of course and in being about to elect Mr Corbyn, it looks like the Labour Party is not only going to apologize but atone for the entire Blair era.

    (There is perhaps a transciption error in the date (I think it should read 1997) at the start of the final full line of your third paragraph.)

    1. Vanessa
      August 17, 2015

      Many people do and have apologised for things that happened decades before they were born but NEVER something they, themselves, were responsible for.

  11. alte fritz
    August 17, 2015

    Public expenditure is good and necessary. Private capital is inherently bad. Banks caused the crash so take their assets. Public expenditure will receive the support it needs. Tomorrow is another day.

    I know the summary is crude but it is accurate.

    1. ian wragg
      August 17, 2015

      Keep taking the tablets, a van will be along shortly.

  12. Iain Gill
    August 17, 2015

    Labour needs to accept that their open doors immigration policies will continue to make them unpopular in their heartlands, where UKIP as the only party prepared to talk somewhat sensibly about immigration will continue to gain ground.
    Labour needs to accept that such high proportions of public school boys with little experience of the real world, and so few local accents will continue to be unpopular, and leave them open to SNP style wipeouts.
    Labour needs to accept that they have let down the large social housing estates which once housed miners, shipyard workers, steel workers, and so on, and keeping the populations there now that they are unemployment wastelands was a mistake, the population should have been freed to move to where the jobs were and not kept put as a client voting block.
    And so on.

    1. A different Simon
      August 17, 2015

      “Labour needs to accept that their open doors immigration policies will continue to make them unpopular in their heartlands”

      That would be impossible for Mr Corbyn to do given the proportion of immigrants in his constituency .

      Some of the youngsters around today are likely to witness the population of the U.K. exceed 100 million .

      1. Iain Gill
        August 18, 2015

        I know a lot of immigrants, from different countries, they all pretty much think immigration here is completely out of control and needs sorting out too. The idea that immigrant communities do not want immigration sorting out is wrong.

  13. Ian wragg
    August 17, 2015

    But you haven’t changed
    CMD is determined to stay in Europe despite the evidence of the damage being done by a communist inspired organisation. You signed up to Maastrict and the single market which just entrenched the Franco German stitch up.
    History will show the Tories as the anti British party selling out the people. You will be labelled the party of mass immigration as the numbers inexorably rise
    Once fooled etc etc

  14. petermartin2001
    August 17, 2015

    ” It {The Labour Govt} spent and borrowed too much in the public sector prior to the crash”

    Is this true? The govt deficit was quite an unremarkable 3% of GDP just prior to the crash. The trade deficit was 3% too so that meant the domestic economy was exactly in balance.

    Prior to the crash there was, as you say “excessive credit”, in the private sector. That could have been fixed by raising interest rates.

    That rise would have slowed down the economy as less borrowing occurred. So, to compensate, should the government have run a larger or a smaller budget deficit?

    1. Frank Salmon
      August 17, 2015

      A much smaller deficit. The economy was growing at 3 per cent, but largely because of public and private borrowing. Manufacturing was in recession, but the slack was taken up by a massive increase in public sector employment. Public sector productivity had grown by -3 percent over the labour period.

      1. petermartin2001
        August 17, 2015

        Don’t you see that the figures show that the money deficit spent into the economy, by govt, was entirely to compensate for loss of money to cover the import bill in 2007?

        No-one is saying that government deficit spending should be so high as to distort the financial position of the domestic economy but it can also be too low. I’m not sure why the effect of the import bill is always overlooked by those arguing for a smaller deficit.

    2. Edward2
      August 17, 2015

      So by this logic the bigger the deficit the greater the growth.
      Success and wealth for all through state deficit spending.
      Sounds too good to be true.

      1. petermartin2001
        August 17, 2015

        No. The deficit has to be just right to create that growth without creating too much inflation.

        We see in Greece, Spain and elsewhere in the EZ just what happens when governments are forced by the rules of the euro to run lower deficits than are necessary to maintain their economies in full production.

        Yes inflation ends up being low, but it doesn’t go highly negative. That is due to a loss of production in the economy. The amount of goods and services available for sale falls due to lack of profitability.

        1. Edward2
          August 18, 2015

          Very low or no inflation is good.
          Deflation is good too.
          Lower prices means more sales more demand for our exports better purchasing power for people on low or fixed wages.
          The effect of 5% inflation which I suspect you might find acceptable is to reduce the value of a pension by half in just a decade

          1. petermartin2001
            August 18, 2015

            “deflation is good”

            Theoretically that could be possible. We could have falling wages and if prices were falling faster then we could still have growth and full employment.

            Is it in practice though? Leaving all theory aside, can you show me where and when there has ever been a healthy growing economy in a deflationary environment?

          2. Edward2
            August 18, 2015

            Can you show me an economy where your relaxed attitude to inflation has ended happily?

          3. petermartin2001
            August 19, 2015

            Yes. At least relatively happily!

            The UK, the USA and Japan have had much more relaxed attitudes than the German led EU in the aftermath of the GFC. So although the situation in the UK and USA isn’t fantastic, it’s nowhere near as bad as we see in the EZ. They have imposed silly rules on themselves like 3% GDP max. They have had to led kicking and screaming against having any QE. What they have had is too little and too late to make much, if any real difference.

          4. Edward2
            August 19, 2015

            What you have in the EZ is a number of nations trying to live with a currency exchange rate which is far too high for them as it is driven by successful nations like Germany and to a lesser extent Holland and France.
            My point on inflation remains
            The aim must be to keep it as near to zero as possible.
            Once the target is “just a few percentage points” you are on the road to inflation addiction and history tells us where that ends.

    3. Narrow Shoulders
      August 17, 2015

      3% deficit during a boom period without reducing overall debt when the sun was shining.

      Bad economics but good politics to get reelected unless something unforeseen (which was waiting to happen) goes wrong.

    4. Richard1
      August 17, 2015

      The structural deficit in 2007 was 5% not 3%. The Conservative govt bequeathed a budget heading for balance. Brown was obliged to stick with those plans for 2 years and reversed them in 2000. After 15 years of growth with record tax receipts there was no case for a 5% deficit by 2007. Nor was the money well spent. Most of it got splurged in public sector wage rises and absurd and unnecessary expenditure such as rebuilding every state school whether it needed it or not. Its amazing there are still apologists for the Brown spending boom and subsequent bust – but it should serve the purpose of keeping Labour out of power.

      1. petermartin2001
        August 17, 2015


        Its that’s word structural again which I still don’t think you understand!

        The actual figure shows 3%. So if you want to massage it to be significantly higher you need to explain why. Is it some sinusoidal correction to the trade cycle? Just a couple of years later there was a crash so 2006/2007 cannot have been the maximum point in the cycle. What would it have been in the maximum point and also the minimum point?

        Of course I could be wrong. So if you do understand why the figures need to be ‘adjusted’, maybe you could explain the theoretical basis of your correction?

        1. Richard1
          August 18, 2015

          You are too patronising for your apparent level of knowledge. Look it up – the structural deficit is the govt deficit adjusted for the business cycle. The estimate for 2007 is 5.2%.

          1. Edward2
            August 18, 2015

            Well said Richard
            I nearly said that myself.
            Economists are many and their theories are numerous.
            Someone with a zeal for just one, tends to fit everything that happens to that particular vision.

          2. petermartin2001
            August 19, 2015

            I keep asking you “how is it adjusted”? Show me your working for that 2.2% increase! I suspect you’ve no idea at all!

            If you understand it, and know what you are talking about, you should be able to explain it to your grandmother!

          3. Edward2
            August 19, 2015

            Oh go on Peter do tell us you know you want too.
            Show us how clever you are.

          4. petermartin2001
            August 19, 2015


            I have looked into it, and you’re right, the ‘structural’ deficit is supposedly adjusted in connection with the so-called business cycle.

            But its murky , to say the least. So I genuinely don’t understand where 2.2% comes from. Is that because I’m not “clever” enough? Maybe! Or maybe it just doesn’t make any sense anyway.

            As far as I can make out, the original idea was that a 0% deficit co-incided with a state of full employment. So, over the business cycle we needed something like a 2% govt deficit in the trough and a 2% govt surplus at the peak to maintain that level of full employment.

            But. its been a long time since any mainstream economist has considered it socially acceptable to talk about full employment. The idea that we’d achieve that if the deficit was substantially reduced by 5.2% or whatever other figure you might suggest for the ‘structural’ deficit is absurd, of course. So without that, just what does the 0% base line really mean?

            There’s no allowance made at all in the “structural deficit” correction to the accounting deficit, for the net savings rate of the population or the external trade balance. Unless there is, I can’t see how it can have any real meaning or use at all.

          5. Edward2
            August 20, 2015

            Full employment is not zero unemployment.
            In a nation of probably 70 million people full emplyment could be 2 million.
            Im glad you accept that over some timescale there has to be at least an attempt at a balanced budget.
            If only Mr Brown had agreed with you.
            The other problem is how much of the state budget you put aside to pay back the long term debt out of these figures.
            But I am back to my wish for small low taxing state which borrows and “spends money into existance” much much less.
            About £100 billion a year less.

          6. petermartin2001
            August 24, 2015

            You’re right in saying that full employment isn’t 0% unemployment. There’s always going to be people between jobs and there’s always going to be those looking for their first job.

            So a reasonable definition of full employment would be that anyone who wanted a job would be able to quickly find one. History (from the 60’s) shows that full employment is about 2% of total unemployment. Even if we say it’s 3% that’s much lower than we have now. The Swiss have shown 3% to be quite possible.

            Then there’s the amount of underemployment to consider in the economy!

  15. oldtimer
    August 17, 2015

    I agree with your conclusions about ” the pound in your pocket” (to borrow Wilson`s ill-fated remark) being a decisive influence in electoral fortunes. That being so, you should have a word with your colleagues currently responsible for financial affairs about a deficit that is still not under control and a tax system that remains inefficient, complex and unduly burdensome on the wealth creating elements of society and its savers. They are on borrowed time.

  16. CdBrux
    August 17, 2015

    I think you have a typo end of 3rd paragrpah:

    “Conservatives in 1979 (Exchange Rate Mechanism recession of early 90s)”

    should be 1997 (not 1979)?

  17. Denis Cooper
    August 17, 2015

    Firstly, JR, I hope you will permit me to repeat a comment from several articles back:

    Brown appeared to start off well, until he dumped Prudence, but in fact the seeds of the later disaster were sown within weeks of Labour winning the 1997 general election.

    Back in February the Telegraph published a video of Ed Balls and Ed Miliband in the Treasury back then, jubilant that they had successfully stripped the Bank of England of its regulatory powers:

    The video itself has since been removed, but the text of the article about it is still there, including:

    “Within days of entering office, Mr Brown granted the Bank political independence over interest rates – and followed up the move two weeks later by stripping it of regulation of the banking industry and creating the new watchdog.

    Mr Balls and his colleagues argued the two acts came hand-in-hand, and allowed journalists to link the creation of a new, “tough” regulator to the failure of the Bank to prevent the Barings collapse and the BCCI scandal.

    A decade later, Parliamentary reports into the financial crisis concluded Mr Brown’s watchdog had failed to sound the alarm over the brewing crisis at Northern Rock, and should have blocked the catastrophic takeover of ABN Amro by the Royal Bank of Scotland.

    Sir Martin Jacomb, a former Bank of England director, has claimed that the “disastrous” decision to create the FSA was driven by jealousy within the Treasury and a desire to rein in the central bank’s power. The body was scrapped by George Osborne, and regulation of the City handed back to the Bank of England Governor.”

    Of course the two acts went hand-in-hand, they were both part of the EU model, and following it was just as catastrophic in Ireland as it was in the UK.

  18. william
    August 17, 2015

    ‘Conservatives in 1989’, surely, not 1979!

  19. Denis Cooper
    August 17, 2015

    Secondly, I would like to play devil’s advocate to some extent and ask whether the EU model was in fact a superior model in principle, and could have worked well in this country if certain things had been done differently, or whether the EU model is intrinsically flawed and would never work as well as the traditional UK model which it was allowed to displace, apparently because Brown was trying to send out signals that he was preparing to join the euro, although he didn’t really want to join the euro and even invented tests which made it very difficult for the UK to join the euro.

    As a prime example, if Brown had appointed somebody other than Sir Callum McCarthy as the first head of the new Financial Services Authority, could that person have run it better, and appointed better subordinates, and avoided the bank crashes?

    Well, Sir Callum had had a lot of prior experience in finance and in regulation:

    so on the face of it he was not a bad choice to head up the new body; maybe if there had been more time for the new organisation to bed in, and go through and learn from a few minor crises which did not threaten the whole financial system, then it would have been better placed to avert the catastrophic crisis.

    On the other hand, it could be argued that the Bank of England had been regulating the commercial banks for a very long time and it already had that accumulated experience, so it would have been better to have left well enough alone.

    However leaving well enough alone is not really what the EU does, is it?

    1. Richard1
      August 18, 2015

      The problem with the FSA was not the people in it – who may or may not have been competent. It was that the body responsible for monetary policy – the BoE – was no longer responsible for the consequences of it in the banking system – bank leverage. The bailout was unnecessary and foolish, but whatever the problems in the banking system, had banks had much lower leverage, such a bailout would never have been ‘needed’.

    2. outsider
      August 18, 2015

      Dear Denis, The electricity generating industry was regarded as one of the most safe and solid in the country but nearly half of it went bust or had to be rescued while Sir Callum was regulating it. When his appointment to the FSA was announced, as I recall, lighthearted but in retrospect rather sick jokes were passed about when the banks would go bust. To lose one industry is a misfortune …
      To regulate an industry strongly and successfully in the people’s long-term interest, I feel, one needs to believe in it positively rather than treat its practitioners with lofty disdain or, in the case of a different regulator I can think of, outright hostility.

      1. Denis Cooper
        August 19, 2015

        Thanks for that insight. So some insiders of the financial world actually expected that he would mess up? I didn’t know that.

  20. Vanessa
    August 17, 2015

    No political party ever learns from the mistakes from the past. Once they are elected into government there are different people in the important posts and think they know best.

    It was the Conservative party which took us into the EEC and has never had the courage to say it was a mistake which has led to some catastrophic legislation. It has destroyed so much of our industry and business – fishing, farming, steel, aluminium. and many more.

    Labour, at the time, argued against going in. Did the Conservatives realise it was a good call?

  21. Bert Young
    August 17, 2015

    There are lessons to be learned from the past and sensible people do make things come right . Leadership is a vitally important issue and makes an impact on the public far greater than anything else ; The Conservatives should learn from this , decide how and when to get rid of Cameron and who the right person is to replace him .

    The high cost of the Public Sector is undeniable and it must be brought down ; taking money out of the pockets of the public unjustifiably is not excusable and will be a cost of votes to whoever is in power . Promises of how to reduce Public Expenditure will not wash ; it is only results that count .

    Margaret Thatcher was right to dig her heals in over the EU and her stance concerning the ERM proved to be the right one (read Lawson’s recent book) . Reaction to the EU is very strong and is something at the forefront of public opinion ; keeping the UK in the EU with the constraints presently experienced is not acceptable and it is questionable whether any negotiations can restore the independence voters want . I have recently focussed on the need for a trusted and respected individual to be chosen to lead the “No” campaign and to lead us out of the quagmire . I hope Dr.JR plays a significant role in this .

    I doubt that Labour will be able to make an impact in Opposition for some considerable time . The dissent that presently exists will take a particularly good leader to find a new way forward and create a degree of cohesion that will make sense . The Conservatives should not make the mistake of thinking that the world is now their oyster ; they did not win the last election it was Labour who lost it . This is the time to get the economy going in the right direction and to make the electorate better off . The fences that have to jumped over have all been highlighted so there is no point in putting things off ,

    August 17, 2015

    What is not clear to the voter, in terms of the national and world economy is why Humpty Dumpty who had the most boundlessly intelligent, well educated economic advisors was told to sit on the Wall at all; in fact, they took to bricklaying to build it in the first place.

    For instance, the BoE always with wise deep-voice and furrowed brow gets it wrong as a going concern. The Fed with its regular press conferences, performs verbal somersaults, fencing off questions of “When will you do this, when will you do that? ” with long-winded sleep inducing answers which attract and necessitate supplementary questions ad naseum.

    It appears that every historical economic negative event is well-read, understood and written examinations passed , by every actor on the Economic Stage. Then they plunge us into economic chaos methodically and incrementally.

    The actual physical act of pumping more oil out of the ground by Saudi Arabia is not accomplished overnight nor the fracking in North America. Yet economic activity news from those areas appears to be transmitted to the Fed and the B0E by the slowest method of bush telegraph known to Man. “Whoops we suddenly have thousands of oil tankers anchored off-shore , where on earth DID they come from? ” “Whoops, China is suddenly not buying iron ore, cars, copper and other commodities. It stopped doing it two years ago. Why did not anyone tell us about it? What a confounded surprise! ”

    In truth there can be no real surprises in the world of macro economics.Yet economists, politicians, Fund Managers and Hedge Fund Managers contrive to lose billions regularly. What are they on?

    There has to be something at work other than simple economics. I feel it is geopolitics. allegiances, alliances, military blocs on all sides distorting, ruining and undermining the very simple world of economics. An imperfect example is the Iran negotiations. The contracts, all of them, for the production of electricity by nuclear means is and was held by Russia. Russian technicians with photos online, live in Iran, work in the nuclear power plants; are in charge! Have always been in charge, part of the contracts. So why did the UK amongst others lose out on Iranian high quality cheap oil, impose trade restrictions whilst China and India continued Iranian oil imports at a discount and continued other trade as normal? What was it all about, really?

    Its ok, its ok, we the voters will just busy our tiny little minds in trivial economic chit-chat whilst Humpty Dumpty and his little helpers in the EU and USA continue to build their wall.

  23. Ex-expat Colin
    August 17, 2015

    I think the last labour thing was about loosing control of money and never admitting it. Think Brown followed the USA… as they do? Anyway:

    Pay plenty of benefits, sling in the odd tax allowance change and you are in power for as long as you do that. Then reverse it…and out you’ll go. Repeat!

    Everytime I saw a credit card company buy was RBS. I thought that good for a while as an RBS customer. It became a bit of a worry after a while…monopoly?

    Greece got it right sort of. Take their money for as long as you can. Unfortunately and as usual the weak will suffer.

  24. bluedog
    August 17, 2015

    ‘It wrongly invested in RBS at too high a share price without demanding the changes and reforms needed.’

    A little sunlight on the relationship between Sir Fred Goodwin, his chairman and Gordon Brown could do wonders. Only evidence on oath should be accepted and your correspondent would be happy to ask the questions.

  25. Richard
    August 17, 2015

    Economic performance may have in the past determined who governs the country but this will pale into insignificance compared to sovereignty and immigration issues.

    August 17, 2015

    The British government may be doing the economy a favour, itself a favour and the NHS a dramatic and awesome favour if it took the responsibility for the diagnosis of diabetes,where possible, outside our borders ( Not to America where doctors seem to get a bonus when they diagnose a problem )

    It seems over 3 million out of our 65 million population are suffering from diabetes. Oh and 1 in 4 adults are receiving drugs relating to mental illness of all types. No-one has thought to question any of it. We are so trusting even when presented with daftness.

    If all this is true plus the incidence of people having allergies, being disabled in this or that regard, then we as a nation we best pack up any idea of being a sustainable nation and get off to bed and stay there until the Grim Reaper calls in the morning.

    Sugar is blamed for diabetes. And obesity. Nothing is said of the fact that the food and drinks industry for decades has systematically reduced sugar in just about everything. Not just reduced but eliminated in many cases. Why. Self-intertest. Artificial sweeteners are much cheaper than sugar. Lighter to transport too . Not dependent on someone somewhere growing sugar beet.

    It’s not just diabetes, mental illnesses, disablements allergies. The NHS list is endless. As such it is beyond reasonable belief.

  27. agricola
    August 17, 2015

    Something of much greater interest to me than crawling through the entrails of previous governments disasters is preventing a current disaster in the making. One of your ministers, George Eustace, ex UKIP candidate with a constituency in Cornwall has chosen to behave in an appalling way towards Guernsey. A way which puts him in breach of the constitutional relationship between Guernsey and the UK government.

    The Channel Islands are not ruled by the UK, nor are they part of the EU. Their fishing waters are not governed by the EU’s Common Fisheries Policy. Their boats are not subject to any EU quota system. They run their own sustainable fishing policy. It works, that of the EU does not.

    Guernsey has reciprocal arrangements enabling French and British boats to fish in Guernsey waters and their own boats to fish in French and British waters.

    Eustace has no legal powers to insist that Guernsey should obey EU rules, but has arbitrarily decided that he will extend EU rules to Guernsey waters banning the fishing for certain fish that the EU have banned in their waters. This is totally illegal. When Guernsey protested he cancelled the licences of Guernsey fishermen that enable them to fish in British waters. Either his civil servants are dropping him in it or they are as ignorant of the status of Guernsey and it’s fishing as he is.

    Perhaps you could do the fishermen of Guernsey a favour and get your leader to put Eustace firmly back in his box.

  28. JJE
    August 17, 2015

    Yesterday morning’s Point of View by John Gray on Radio 4 was one piece of BBC output that was very sound on the current Euro zone issues. Recommended reading (or listening).

  29. Boudicca
    August 17, 2015

    Yes….. but up against the man who was most responsible for the banking collapse and the economic crash, Gordon Brown, Cameron and the Conservative Party failed to get a majority.

    Even this year, Cameron and the Tories only scraped a small majority because English voters were scared of an SNP/Labour Coalition. They might have accepted a Labour Government….. but they didn’t want the SNP pulling Miliband’s strings.

    So, Mr Redwood, I don’t think there is any reason to expect that the Conservative Party will be in power until Osborne (or his successor) engineers an economic catastrophe.

    Osborne hasn’t exactly done a great deal to repair Labour’s damage. We STILL have a huge deficit. Debt is still rising and Cameron seems more determined than ever to keep the UK shackled to the EU, which is doing more and more damage to the UK with every month that passes.

  30. Chris S
    August 17, 2015

    One action of Gordon Brown has often been underestimated in its long-term effect on his and Labour’s reputation for financial incompetence and mismanagement.

    A substantial proportion of adults will never forget the gold debacle in which Brown stupidly announced in advance on 7 May 1999 that he intended to sell half of our gold reserves.

    Unsurprisingly the price fell 10% before the first auction he held two months later on 6th July. He then went on to sell a total of about 395 tons of gold over 17 auctions at prices that cost the British taxpayer several billion pounds as the price rose progressively to almost $1,900 an ounce in 2011 before falling back in 2015 to “only” four times the price achieved in Brown’s first auction !

    The public don’t seem to have picked up on the other costly mistakes when in 2008 he took only an 81% share in RBS in return for investing £20bn in the bank.
    The full extent of these mistakes is only now being realised when George Osborne recently had to sell a small stake in RBS at a loss of £1bn.

    The loss was made, not by Osborne’s sale but by the excessive price paid by Brown for what was a bankrupt institution.

    And we haven’t even mentioned his promotion of the Lloyds/HBOS merger which has proved so costly for Lloyds shareholders.

    Brown and his cohorts are serial offenders in the realm of Labour financial incompetence and if a majority of their supporters do go on to elect Corbyn as leader, it will be final proof that Labour has totally lost the plot.

    PS : In the unlikely event of him winning, what shadow cabinet job could Burnham possibly give Corbyn that won’t damage the party’s reputation still further ?

  31. JimS
    August 18, 2015

    “It then with its regulators made the worse error of revealing the weakness of the banks without helping them fix their illiquidity, bringing the whole banking system close to collapse. “

    I would blame the ‘expert’ hand of Vince Cable for that one – “Oh, look everybody, Northern Rock has no money, aren’t I clever!”

  32. Brigham
    August 18, 2015

    Mr Micawber’s dictum still holds good in my opinion. Why should it not apply to countries?

  33. Edward2
    August 18, 2015

    Interesting reminder to those who think there is no reaction to endless increases in the tax burden comes in todays Times with a story saying:-
    “Scottish tax brings market in £1milliom homes to a standstill”
    Apparently a buyer of a £1.2 million property will pay £63,750 in the UK but now £102,350 in Scotland after the SNP have recently increased taxes.
    The market has plunged by 90%

    Do socialist never learn that increased tates can result in lower revenues.

  34. Lindsay McDougall
    August 19, 2015

    Labour began to get it wrong a lot earlier than 2005, in 2001 in fact. There was already fiscal creep between 2001 and 2005 but the big error was in monetary policy. Gordon Brown gave the Bank of England and the MPC the wrong inflation index to target, namely CPI.

    What he should have done was to inflation an index that included asset prices, particularly house prices. He should also have thought about including things that the rich spend their money on, such as gold, fine wines, art and vintage motor cars.

    The Bank of England and the ONS employ some of the finest young minds in the Kingdom. Mervyn King would have been delighted to get them to devise a suitable index but Gordon Brown didn’t want to know.

    As a result of this strategic error, monetary policy was too tight between 2001 and 2007 (when house prices rose) and too loose in 2008/09 (when house prices fell). Mr Redwood has often observed the outcome – now he has the explanation.

    It is only worth discussing this because a return to inflation targetting as the main instrument of monetary control is desirable – but it must use the right inflation index.

    While we are about it, why don’t we move to a target of zero inflation, as was the norm pre WW2?

    Reply As I have previously written I do not believe the Bank was truly independent in its judgements on interest rates. The public intervention to change the inflation target was not only bringing us into line with the EU but also was convenient as the lower figures for the CPI gave added reason to keep rates down.

    1. Lindsay McDougall
      August 19, 2015

      Sorry, I made a silly mistake in para 4. It should read:
      “…………….. monetary policy was too loose between 2001 and 2007 (when house prices rose) and too tight in 2008/09 (when house prices fell).”

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