Responses to the crisis

The banking industry seems to have been hit by a ‘perfect storm’. Some people warned it years ago that the development of derivatives was heading it in that direction, but it didn’t listen much as big bonuses were to be made out of ever more and more tortuous financial instruments which disguised bad debt. This led ultimately to a collapse of trust in the sector by the sector itself.

Curiously this turn of events seems to be benefiting Gordon Brown, if some polls are to be believed. BBC commentators especially are seizing on it almost to blame the Tories for the crisis or at the very least for not having solved it. The aggressive tone of Emily Maitlis’s interview with George Osborne last night betrayed a hostility not in evidence last week when Labour politicians were being interviewed. On wonders why.

David Cameron has struck the right note for a Leader of the Opposition and PM in waiting in this situation. ‘We are a responsible opposition’ who will not seek party advantage. It’s hard to see what else he could do under the circumstances.

But we must not, and the BBC must not, lose sight of the following:-

  • The Tories are no more responsible for any part of this than the Man in the Moon. They’ve been out of office for 11 years.
  • The present government encouraged people to believe that it had abolished the economic cycle. It was GB’s proudest boast, oft repeated, and believed by many people including himself.
  • Brown directed the ‘independent’ Bank of England to concentrate its attention and interest rate policy on a price index that deliberately ignored the most sustained period of house price inflation in living memory. Low interest rates thus fuelled the massive boom in house prices and general debt that caused the economy to become the subject of a financial bubble that was bound to burst some day.
  • Brown threw money at unreformed public services more lavishly than any previous Chancellor. He had the most benign economic circumstances for Britain since 1914 in which to do so and his profligacy has left the cupboard bare. This policy gave him a vested interest in stoking house price inflation because of the revenue it brought in stamp duty and inheritance tax.
  • The bursting of that bubble – entirely foreseeable to anyone with a smattering of economic history – has led to collapse of tax receipts and a black hole in the public finances.
  • Nevertheless at Manchester last week Brown was making unfunded spending pledges galore.

So is Brown really the best man to deal with the crisis?


About pauljohnston

Elected as Conservative councillor in Surbiton Hill, Kingston upon Thames in 1998. Re-elected 2002 and 2006. Former parliamentary candidate in Lancashire and Birmingham. Ceased to be a Councillor (temporarily?) in 2010. Active among Residents' Associations in Surbiton Hill and among residents in social housing generally. Former teacher of History at St. Brendan's College Bristol and Head of History and Politics at the London Oratory School. Worked with Sutton Trust running summer schools for sixth formers at Oxford University from 1997-2000 aiming to improve uptake of places from pupils from state schools which sent very few applicants to Oxbridge.
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1 Response to Responses to the crisis

  1. Tim Ramsey says:

    I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog.

    Tim Ramsey

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