12th February 2001. DEBT!
The Biblical Parable of the ‘unforgiving servant’ tells of he who had been forgiven his own debts, refusing to forgive his own debtor, and has him ‘delivered to jailers till he pay his debts’. Imprisonment for debt has a long history, only to end in Britain in the mid-19th century.(1)
On Monday Today in 2001, Tony Benn, Labour Party politician recorded in his Diary (2) that the European Union had warned Chancellor of the Exchequer, Gordon Brown that his public expenditure plan exceeded the limit set by the European Union.
Ten years later many countries in the Euro-Zone, including Ireland, were in deep financial trouble and Britain had the biggest deficit in history.
Benn went on to say that if you go into Europe [by joining the Euro], they will cut your pensions, your health expenditure, education and that apparently they are talking about a £12 billion cut in Britain.
In fact Benn’s figures were wildly optimistic for after 13 years of Labour in 2010, Britain had the biggest Budget deficit in history: Public sector borrowing was 53.4% of GNP (40% in 1997).
The Budget Deficit of 6 billion £ in 1997, by the time the Tories took over in 2010 was 160 billion £. Labour’s chickens had come home to roost, bust, after ten years of boom under Chancellor Brown, who had previously talked about abolishing ‘boom and bust’.(3)
However Labour did wisely avoid Britain becoming part of the Euro-Zone which saw other countries such as Greece, Portugal and Ireland burdened with huge debt which caused huge retrenchment in those economies.
The great problem of debt resulted in the 2008 banking credit crisis, after a time of the banks’ profligate lending. Then came pay-back time, the credit crunch and depression.
A Bank Rate which was 4.5% in October 2008, had fallen to 3%, the largest cut since 1981, in the next month, then in December it was 2%.
By March 2009 the Rate was 0.5%, the lowest for 300 years. In May the Headline Retail Price Index (RPI) was -1.2%, the lowest since 1948.
In 2008/9 in one six-quarter period Gross Domestic Production (GDP) fell 5.9% and unemployment in November was 7.9%.
With bank collapses on the cards, the Labour Government saved matters by injecting taxpayer money into Royal Bank of Scotland, and Halifax Bank of Scotland which was taken by Lloyds.
To stave off calamity, the Bank of England’s ‘Quantitative Easing’ provided £175 billion of new money, and attempted a marginal fiscal stimuli by car-scrappage, VAT reduction and a stamp money holiday.
In May 2010 the Conservative-Liberal Coalition were concerned to reduce the budget deficit (the difference between taxes and spending) of £150 billion left by Labour over 13 years mismanagement.
(1) Imprisonment for debt was chronicled in Charles Dickens’ Little Dorrit novel
(2) The Benn Diaries: 1991-2001.
(3) Prime Minister Gordon Brown (from 2010) who had once talked about ‘abolishing boom and bust’ in his efforts to talk about investment rather than cuts. At one Prime Minister’s Question Time he talked about growth being zero percent!
PM Question Time is held in the Commons every Wednesday at 12.00-12.30am.
Ref: The Benn Diaries 1991-2001.
Ref: thisismoney.co.uk/money. Lee Boyce.
Ref: goodsalt.com. Pic. Ref.
Public Sector National Debt is a measure of how much the UK public sector owes at any given time. Public Sector Net Borrowing is the difference between total accrued receipts and total accrued (current and capital) expenditure over a period and is the public sector deficit.