Did No-one See it Coming?

One of the constant mantras from this Government is that the current financial crisis was unexpected and unpredicted. According to Gordon Brown, Britain is uniquely well placed compared to other major industrialised countries. This has been somewhat blown out of the water by the recent IMF report which found that Britain’s recession is likely to be worse than any of our major competitors and significantly worse than the EU as a whole. The UK economy is predicted to shrink by 2.8%, compared to an EU average of 2%. Only Ireland is likely to fare significantly worse than us.

So should the Government have seen this coming?

It doesn’t take too long looking on financial websites to find people who were sounding alarm bells about the level of debt as long ago as 2005. This article is particularly prescient about the reckless lending that was being undertaken by some banks.

The truth is that many people were warning about the huge growth in personal debt, the over-inflated housing market, and the risky lending of so many of our major banks. Because he had received such a good economic inheritance, Gordon Brown believed that the economic rules of the past no longer applied and that the good times would continue to roll. Now the bust that countries face is roughly equal to the size of the boom they enjoyed. The UK’s boom was heavily dependent on personal and corporate debt and unsustainable levels of Government spending.

During his Labour Party conference speech in 2000, Gordon Brown said “We will not put hard won economic stability at risk. No return to short-termism. No return to Tory “boom and bust” and he then continued “why did the Tory party give Britain twenty years of stop-go, twenty years of boom and bust? It is Labour that is now the party for stability and growth.” How hollow those words sound now!

I fear that we must now go through a prolonged period of recession to correct the imbalances that were allowed to bloom on “Boom and Bust Brown’s” watch as Chancellor. Whoever wins the next General Election is going to face economic constraints not seen since at least the late 1970’s and possibly since the immediate post-war period.

Britain is broke and the truth of this fact is only beginning to dawn on the British public. When the penny finally drops, Labour are likely to suffer electoral meltdown on a scale that will make 1997’s Conservative rout look mild.