From the TUC

The Deficit: Is Labour Really to Blame?

12 Aug 2010, by Guest in Politics

So common has it become for the White House to blame all bad news on the last administration that a Washington joke claims that Obama is planning to name a newly discovered trench deep under the US, “Bush’s Fault”.

Much more of this sort of stuff from the Coalition and maybe we’ll soon see Gordon’s Fault opening up somewhere under Whitehall.

One of the recurrent claims of the Government, repeated to much fanfare today, is that Labour got us in to our fiscal mess by spending too much. In particular, it is often claimed that if Brown had paid down debt and built a surplus before the Crash, we would not be in the position we are now.

It is interesting, therefore, to look at the pre-Crash fiscal condition of some countries now with high deficits to see if this is borne out.

According to the OECD (PDF), seven of its member countries exceeded the OECD average deficit of -7.9% by the end of 2009.  The table below shows what their deficit as a percentage of GDP was in 2007 compared to 2009:

2007 2009
Ireland 0.1 -14.3
Greece -5.4 -13.5
UK -2.7 -11.3
Spain 1.9 -11.2
USA -2.8 -11.0
Portugal -2.7 -9.4
Iceland 5.4 -9.1

So, in fact, three of the countries now in the direst state had surpluses before the Crash and four were in deficit.  Indeed, Iceland had one of the healthiest fiscal positions of all OECD nations  in 2007.

The one thing these countries do seem to share is not a bad deficit position prior to the 2008 meltdown but economies heavily reliant on banking and/or construction – the sectors probably hardest hit by the Crash and recession.  There must be a lesson there but I’m not sure it’s the one this Government has drawn from the experience of the last three years.

2 Responses to The Deficit: Is Labour Really to Blame?

  1. Tweets that mention The Deficit: Is Labour Really to Blame? | ToUChstone blog: A public policy blog from the TUC — Topsy.com
    Aug 12th 2010, 2:28 am

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  2. The Squeeze
    Aug 13th 2010, 2:38 pm

    Yes, the countries that brought the most spending and taxation forward by profiting from the credit and land price bubbles have suffered the biggest decline in revenues.

    It doesn’t matter what Gordon, Ed, Dave or Nick have learned, the home-owner-ist electorate will never approve counter-cyclical fiscal reforms (i.e. taxing land values).