Brown's Poison Pills part 5: The Banking Crash
One of the mistakes which probably helped to cost Ed Miliband the 2015 election was when he was asked on TV “Do you accept that when Labour was last in power, it overspent?” and began his answer with the basically incredible response "No, I don't."
Cue gasps in the studio and headlines about how this showed Labour had not learned their lesson.
Ironically, that question had been anticipated by Labour's team and they had agreed a vastly more credible response - which although it would not have got them totally off the hook would have both demonstrated ability to learn and understand what went wrong while still minimising (and in my opinion understating) their responsibility for the recession.
According to Patrick Wintour in The Guardian, the prepared response to that question had been along the following lines:
“I don’t think every penny was well spent. I can give you plenty of examples where the last Labour government did not spend money well and, as someone who believes that spending on health and education can change lives, it is incumbent on me to make sure that every pound is well spent. But if you are asking me, ‘Did that spending actually cause the crash?’, the answer is ‘No.’ The answer lies in failure to regulate the banks.”
Labour did overspend: that overspending made the recession much more painful than it would otherwise have been and was the main reason that the painful decisions usually described as "austerity" would have been pretty much unavoidable for whoever had won the 2010 and 2015 general elections.
Labour's prepared answer which Miliband was supposed to give was correct in that the actual trigger for the crash was a banking crisis following the failure of poor investments by a number of banks, particularly in Britain and America, and a failure by government to properly regulate them.
However, this really does not exculpate the previous Labour government in general, or Gordon Brown in particular, of responsibility for a major share of blame for the recession.
Were Miliband's team hoping that the British electorate had forgotten who introduced the system of bank regulation which was in place at the time the decisions were made which led to the banking crisis?
They probably were, and some people probably had, but here is the answer in two words.
GORDON BROWN.
At almost exactly the time he gave the monetary policy committee of the Bank of England control over interest rates (one of the very few decisions by Gordon Brown which I strongly support) he also decided that, not wanting the Bank to have too much power, it should lose it's powers to regulate the banks.
So the very experienced and effective team at the Bank of England which had done an extremely good job of regulating the banks for decades was disbanded, and a set of new institutions set up.
To what extent the fact that this new system abysmally failed was due to mistakes by the new set of regulators, and to what extent it was due to the steer towards light regulation combined with institutional framework and the set of powers and resources they were given by the UK government (e.g. Gordon Brown) is beyond my expertise to judge. What is not in dispute, and certainly cannot be disputed by the Labour party given their view referred to above that it was the failure of bank regulation and not overspending which caused the crash, is that the system of bank regulation introduced by Gordon Brown was a catastrophic failure.
The recession was of course a global one, and Britain was not the only country which had failed to adequately regulate it's financial institutions, or the only one to suffer the consequences. Even if the British government and British banks had managed everything perfectly we would probably still have been affected, though possibly not as severely. The major part of the debt which results from the bank bailouts would not have been necessary, for a start.
But the British government and British banks did not manage everything perfectly and "it started in America" is up there with "The dog ate my homework" in the litany of pathetic excuses.
Insofar as any one person bears the primary responsibility for the specifically British mistakes which contributed to the crash, the recession, and all the pain which has resulted over the past few years - including the build up of debt and the "austerity" required to bring that under control - that person was Gordon Brown.
It is often said that the careers of chancellors careers end in failure, the rest get out in time. There is a certain amount of poetic justice that the reputation of Gordon Brown's premiership was largely destroyed because the mistakes he had made as chancellor came back to haunt him. What a pity that all the rest of the population of the UK also had to bear the consequences.
Cue gasps in the studio and headlines about how this showed Labour had not learned their lesson.
Ironically, that question had been anticipated by Labour's team and they had agreed a vastly more credible response - which although it would not have got them totally off the hook would have both demonstrated ability to learn and understand what went wrong while still minimising (and in my opinion understating) their responsibility for the recession.
According to Patrick Wintour in The Guardian, the prepared response to that question had been along the following lines:
“I don’t think every penny was well spent. I can give you plenty of examples where the last Labour government did not spend money well and, as someone who believes that spending on health and education can change lives, it is incumbent on me to make sure that every pound is well spent. But if you are asking me, ‘Did that spending actually cause the crash?’, the answer is ‘No.’ The answer lies in failure to regulate the banks.”
Labour did overspend: that overspending made the recession much more painful than it would otherwise have been and was the main reason that the painful decisions usually described as "austerity" would have been pretty much unavoidable for whoever had won the 2010 and 2015 general elections.
Labour's prepared answer which Miliband was supposed to give was correct in that the actual trigger for the crash was a banking crisis following the failure of poor investments by a number of banks, particularly in Britain and America, and a failure by government to properly regulate them.
However, this really does not exculpate the previous Labour government in general, or Gordon Brown in particular, of responsibility for a major share of blame for the recession.
Were Miliband's team hoping that the British electorate had forgotten who introduced the system of bank regulation which was in place at the time the decisions were made which led to the banking crisis?
They probably were, and some people probably had, but here is the answer in two words.
GORDON BROWN.
At almost exactly the time he gave the monetary policy committee of the Bank of England control over interest rates (one of the very few decisions by Gordon Brown which I strongly support) he also decided that, not wanting the Bank to have too much power, it should lose it's powers to regulate the banks.
So the very experienced and effective team at the Bank of England which had done an extremely good job of regulating the banks for decades was disbanded, and a set of new institutions set up.
To what extent the fact that this new system abysmally failed was due to mistakes by the new set of regulators, and to what extent it was due to the steer towards light regulation combined with institutional framework and the set of powers and resources they were given by the UK government (e.g. Gordon Brown) is beyond my expertise to judge. What is not in dispute, and certainly cannot be disputed by the Labour party given their view referred to above that it was the failure of bank regulation and not overspending which caused the crash, is that the system of bank regulation introduced by Gordon Brown was a catastrophic failure.
The recession was of course a global one, and Britain was not the only country which had failed to adequately regulate it's financial institutions, or the only one to suffer the consequences. Even if the British government and British banks had managed everything perfectly we would probably still have been affected, though possibly not as severely. The major part of the debt which results from the bank bailouts would not have been necessary, for a start.
But the British government and British banks did not manage everything perfectly and "it started in America" is up there with "The dog ate my homework" in the litany of pathetic excuses.
Insofar as any one person bears the primary responsibility for the specifically British mistakes which contributed to the crash, the recession, and all the pain which has resulted over the past few years - including the build up of debt and the "austerity" required to bring that under control - that person was Gordon Brown.
It is often said that the careers of chancellors careers end in failure, the rest get out in time. There is a certain amount of poetic justice that the reputation of Gordon Brown's premiership was largely destroyed because the mistakes he had made as chancellor came back to haunt him. What a pity that all the rest of the population of the UK also had to bear the consequences.
Comments
I have to strongly disagree with you on this point Chris, many good people have suffered enormous consequences from decisions they were never asked about, let alone allowed to vote on. What has HWSNMN suffered? other than a bruise in his pride perhaps, he still gets a very very nice pension and a chance to publish his memoirs, whilst the endless good people who did suffer continue to do so.
I would not call that Justice, be that poetic or otherwise, to me HWSNMN should have been sacked for "gross misconduct" and should have also faced a prison sentence for fraud (after the selling of gold)
*HWSNBN
I'm not going to get into an argument about whether he has been punished enough as there is no amount of suffering you could possibly inflict on one mortal human being equal to the harm he caused.
The reason I think he has been punished is that it would appear that the main object of his life was to become Prime Minister, and he was not only voted out of that job but will be remembered even by Labour supporters in terms like this (the quote is from Labour activist Hopi Sen):
"The premiership of Gordon Brown was a failure of such enormous proportions and devastating consequence that we in the Labour Party will not win a general election until we understand what went so terribly, terribly wrong."