Labour never works

Andrew Williams on why no-one in politics is brave enough to admit that the welfare state is one of the great disasters of UK history
Commercial awareness
Politics and economics

The mess that Darling found himself on Thursday was of his own party and his own boss's making.

The bottom line is the Labour Government made a right pig's ear of things between 1999 and 2007. History shows that it always does...

The First Labour Government of 1923-24 was voted out of office after a Commons vote of no confidence. Enough said.

The Second Labour Government of 1929-1931 presided during the time of the Wall Street Crash of 1929 and the Great Depression. During its tenure, unemployment soared to 2.5 million to which it had no answer. It was forced to admit defeat and gave way to a National Government. Depressions and Labour Governments go together.

The third Labour Government of 1945-51 created one of the great unbridled disasters in UK history - the welfare state. No one in politics is yet brave enough to admit it, but we cannot fund the wider reaches of the welfare state and the massive public pension liability. The welfare state has created a situation where a minority of workers funds the lifestyle of a majority of non-workers. It creates moral hazard where people have a perverse incentive not to work, or be ill because they know the state will pick up the bill.

In 1950, after only five years of founding the 'free' NHS, the Labour Government announced prescription charges. It was forced out of office after again nearly bankrupting Britain after failing to control defence spending during the Korean War.

The last Labour Government of 1974-1979 was forced to devalue the pound and go cap in hand to the International Monetary Fund (the IMF). It presided over the Winter of Discontent in 1978-1979 when rubbish went uncollected in the streets and dead bodies remained unburried. The British people said enough was enough and turned to Margaret Thatcher to sort out the mess. For the first time in the 20th Century, Britain started to rebuild its economy.

Labour Did not Work this Time

For a few years, this Labour Government, voted to power in 1997, seemed to have learned the lessons of the past - that massive state funding and 'big government' simply does not work. Public expenditure crowds out private expenditure and public servants never run anything better than profit-motivated service providers.

So in 1997, Tony Blair announced he would stick to Conservative Party spending plans for the first two years of his government.

In 1999, however, the Labour Government started spending on a massive scale.

The seeds of our current plight were sown as Tony Blair and Gordon Brown turned on massive taps of public money and allowed them to gush into inefficient and unreformed public services, squandering the proceeds of our economic growth on an ever-increasing army of civil servants.

Some of this expenditure was paid for by rising tax receipts.

However a large proportion was borrowed.

Brown allowed the public sector borrowing requirement ("PSBR") to tick up each year, adding to the National debt.

He hid yet more borrowing by using Private Finance Initiative ("PFI") schemes to fund public/private partnership projects.

As a result, the cost of public works like prisons and hospitals has been kept off the National Debt.

By 2007, even after 26 years of almost unbroken economic growth, the Labour Government had swelled the public sector to an unprecedented level of bloatedness and inefficiency.

In doing so, it had run up a massive debt mountain.

It was at this point that the credit crisis blew up, admittedly originating in America but echoed here, with an over-reliance on debt at three levels - Government, corporate and individual.

The Labour Government encouraged an unregulated financial sector that it did not understand to provide debt funding for its own bloated spending and that of companies and individuals.

In doing so, the Government set an appalling example to everyone else.

It was ludicrous to blame the bankers. It was the Government who created the benign conditions for them to operate, the Government who failed to regulate them, and the Government who wanted to borrow debt as much as anyone else.

When the crisis came, the Government and the UK economy had nothing left in reserve to cope.

And that, my friends, was squarely the fault of the Labour Government and Gordon Brown.

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