Liberty, Politics and Economics

The Economic Rape of Britain’s Youth

We should all feel sorry for Britain’s youth, not least because of the economic rape perpetrated on them by 13 years of Labour Government.

First, let’s be clear about the economic legacy left by the last Labour Government.  The deficit was a whopping £155,000,000,000 in one year!  This has now taken the debt to well over £1,000,000,000,000 that must be paid down by our children and grandchildren.

Whilst I have heard many Labour politicians responsible for this eye-watering number blame it on extra spending required to avert an “international financial crisis” created by bankers, the facts do not support this defence.

It was not a “world-wide” crisis as it affected only countries that ran up huge Government deficits (Greece and the UK being prime examples) or massive private deficits (Ireland).  This includes the US who refused to raise very low tax levels to meet spending obligations, and the EuroZone who cannot put taxes up any higher to match their totally out-of-control spending plans.  Many countries, including Canada, Australia, Saudi Arabia, China, Sweden Germany and much of South East Asia all avoided the worst of the crisis because their spending was more-or-less in line with their tax revenues.  Labour must take its share of the blame with the bankers, as it was them that ran up Government debt.

Also, Labour turned on the spending tap long before the 2008 – 09 financial crisis.

http://www.ifs.org.uk/bns/bn99.pdf (see Fig. 4.1 on page 10)

Labour spending went from 36% of GDP in 1999-2000 to 42% in 2005 -2006 whilst revenue was broadly flat at 37% of GDP over the same period.  Increasing Government deficits is not new and the size of this early deficit was not unusual by historical standards.  But the key difference here is that Labour increased spending and debt during the boom which started at the end of John Major’s Government.  We expect Governments to increase spending and deficits during a recession.  This is essential to cover increased unemployment benefits and lower tax revenues and smooth out the economic shocks that inevitably hit the most vulnerable citizens.  However, prudent Governments will then pay down debt during the boom times to allow more future borrowing when the economic cycle inevitable takes a turn for the worse.

Remember that the deficit is given as a percentage of GDP, which is much higher during a boom therefore the deficit is proportionally bigger.  Also, the last boom lasted for a long time, an unprecedented 16 years, allowing massive debt to build up if you were foolish enough to continue to borrow during this time.

The reason that Labour felt they could borrow with impunity, even during a boom, was it believed it had banished “boom and bust” economics.  Gordon Brown famously made this statement in the House of Commons. The world’s finances were linked for the first time by technology and Labour believed the massive global market could spread financial risks. Labour bet the country’s financial health on a belief that asset values would continue to rise, allowing borrowing against those assets.  Finally, Labour selfishly expected our disenfranchised children and grandchildren to pay back the debt sometime in the future, believing this was acceptable because it assumed the economy would be much bigger by then and they could afford it.  This is undemocratic and immoral.

Labour was wrong on all counts.  The connected global markets did not spread the risk, it spread the contagion, asset prices fell and the economy shrank increasing the debt to income burden.

Consequently, when the financial crisis hit in 2008 there was no more credit available, which left the UK economy unusually exposed.

Labour’s profligate and selfish policies will materially affect the lives of today’s youth.  They will already struggle to pay the massive pensions and healthcare bills of the much larger, soon-to-retire baby boomer generation (particularly as Gordon Brown also spent the money saved for their future pensions).  Britain’s youth must now also pay back their own University tuition fees and living expenses, something their parents got for free. To additionally pay back our eye-wateringly large trillion pound debt is surely beyond the pale?

Interestingly, Britain’s youth seem to have more sense than their parents, and have rumbled the cause of this economic catastrophe:

“Young Britons are classical liberals: as well as prizing social freedom, they believe in low taxes, limited welfare and personal responsibility.

and….

“Every successive generation is less collectivist than the last,” says Ben Page of Ipsos MORI, a pollster. All age groups are becoming more socially and economically liberal. But the young are ahead of the general trend. They have a more sceptical view of state transfers, even allowing for the general shift in attitudes”

See The Economist leader on this subject and the full article.

None of the old political parties match the political views of Britain’s youth.  They have a choice between illiberal (i.e. socialist) economics and liberal social policy (Labour) or liberal economics and illiberal social policy (Conservative).  Whilst valuing personal freedom Britain’s youth is fed up with collectivist, socialist economics .  They seem to think Boris Johnson has views most akin to their own.

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