Ed Miliband’s worst moment in the Question Time debate came when he refused to accept that Labour had spent too much before the crash. The audience reacted with fury: how could he be trusted if he has yet to work out what he did wrong? This is toxic for him because his denial is completely genuine: he has convinced himself that the debt crisis is unconnected to what he got up to when serving in HM Treasury.
After three years of prudence, Gordon Brown switched tactics in 2000 and committed himself to a massive, audacious project: the Europeanisation of the British economy. He set out to shift our political centre of gravity, from being the ‘third way’ between the EU and the US and becoming an EU-style country with a massive government and masses of people dependant on that government. This was the Brown project. So the years 2000-10 saw the size of the state soar from 37pc to 50pc – a rise of 13 points. This is a faster rise than any other country, over any other postwar decade. And half of the damage was done by 2007, before the crash.
The above graph, using OECD data, tells the tragic tale. At the start of that decade, Britain’s spending was closer to that of the USA, but Brown then started his massive increase. He started to forcefeed the state like a foie gras goose, but couldn’t squeeze enough tax from the country. So his splurge was financed by debt (below). Brown stood out from every other global finance minister in borrowing like crazy, during the boom. So UK finances were in a precarious state when the crash struck.
By the time Lehman Bros collapsed, Brown had already increased Britain’s national debt by 43 per cent to fund his expansion of the state. He was already running up massive deficits: there was no deficit in 2000/01 but Brown (and his lieutenants Balls and Miliband) were running up a bizarre boom-time deficit of 3pc of GDP by 2005/6, the maximum allowed under EU rules. Brown’s ruinous profligacy defied every rule in the book of financial management. Even Keynesians argue that you need to run a surplus (i.e., reduce debt) in the good times. Brown had a different motto: more debt in the boom, more debt in the bust. And if it goes wrong: well, that’s my successors’problem.
Several countries that fared best during the crisis – Sweden, Australia, Canada etc – have laws forcing the government not to jack up any more debt in the boom years.
Look at the debt (below) – not a penny of this is connected to bank bailouts. And even now, Miliband can’t bring himself to recognise what he did. As the lady from the Question Time audience so beautifully put it, if he can’t, why should voters let him do it again?