Sunday, 24 February 2013

AAA Downgrade Disaster



On Friday night the Rating Agency Mood's downgraded the UK Economy from AAA to Aa1.

The first time in over thirty years a government economic agenda has been so comprehensively undermined because of a simple failure by the Conservatives to see the simple truth; that the decision by George Osborne to cut too far and fast in the Emergency Budget in 2010 was a risky, dangerous and flawed choice.

Every country in the world experienced a downturn in 2008 as a result of a banking crisis ostensibly caused, in my mind, by a two-term Republican President who refused to re-capitalise Lehman Brothers leading to a flight and loss of confidence in the banking system. The same Republican Party which led the worlds largest economy into a debt binge which, when exposed, caused contagion across the world. Britain may not have had the correct regulatory and compliance policies in place but the root cause was the US; the right wing President put a political principle first that the state had no place in supporting a failing institution, and the result was economic contagion from which we are still struggling. The same right wing cousins today in the UK  today still preach about the state not interferring with industries as if the banking crisis; RBS, Lloyds, HBOS, Northern Rock were all a distant memory.  Unbelievable complacency that the world can be seen in such absolutes. 

The recession was not caused by spending on schools, hospitals, military or Police. These are people who have committed to a life of public service and played no part in trading derivatives, or playing roulette with shares on the stock markets, or in lending of dodgy products to people who could never repay, or of rigging the LIBOR markets or selling PPI to those who didnt understand or need them. Millions of working people who fight for our country and freedom, make us better, keep us safe, educate our kids, clean our streets and save our lives were and are blamed by the same right wing that has espoused policies of deregulation for over thirty years. The same Tories blame Labour spending but the truth is that the National Debt in 2007 was lower then that in 1997; we did pay back our debts when the sun was shining but we also invested in schools, hospitals and our public speace. The fact our national debt GDP was so low is the reason why we could then engage in stimulus in 2008/09 and retain our AAA status at the same time (up until Friday). The Tories know this to be true but distort and deceive the truth.

The simple fact is the loss of AAA rating could be a seminal moment for the government because Labour never lost AAA status in 2009/2010 because our policy was credible. The Tories have because their policy is not.

The opposition needs to set out and have a messenger which can articulate the alternative fiscal strategy. 

Labour is now a centrist economic party having rejected the lefty dogma of the 1980s and as David Blunkett once said removed the 'maggots in our midst.' The far lefty agenda of ignoring debt now resides on the far left; TUSC and to some extent the Greens. It is not credible precisely because markets rely on confidence from government and we all know that unsustainable borrowing is not a recipe for success. I have sympathy with the notion that the language of austerity and the pace of it matters; but we need to accept also, and I have argued this in the Labour Party, that we must be responsible at all times because the public look at Labour under a different prism when compared with the Tories.

However far from what is said by the far left there is a difference between Labour and Conservatives; the Pickles Poll Tax and Bedroom Tax would not have happened under Labour because we know taxing those with no money is not only morally repugnant it is also fiscally stupid as well (as they cant pay what they dont have). Labour would re-introduce the 10p tax to those on low incomes - a mistake of the previous Labour government - but one we needed to correct. We would introduce a Mansion Tax on those who are sitting in properties worth millions and we would re-introduce the 50p tax rate to ensure those with the broadest shoulders pay their fair share. We would look at the living wage because we all know when low and middle income families get wealthier they spend and economies grow. We would not undermine workers rights but nor would we return to the 1970s and 80s where industrial strife caused by some irresponsible Union chiefs led to a loss of confidence in the left to lead our country. We would chastise rogue landlords and would control pay day lenders. 

In short we are ready to be a credible party of government

There is a difference between Labour and the Conservatives and I am proud to highlight it; but Labour knows it needs to be credible to build that broad coalition of voters that won us elections over a right wing and backstabbing rabble. 

The Conservatives have shifted to the right and are running scared of UKIP. Cameron may have some vestiges of credibility by virtue of the pulpit he can manipulate but he leads a moribund party whose brand is tarnished. 

The debate over Equal Marriage in Medway is a microcosm of his problem; at the last Council meeting I was attacked once again for articulating a coalition policy position, and dont let polling get in the way, has widespread popular support. Labelling gay marriage as leading to polygamy, citing evolution and best 'fitting in' is the recourse of those losing the argument. The simple truth is that the Tory membership just dont get it; labelling me a bigot and screaming at me in the Council Chamber over a policy your government and MPs voted for is just bonkers. But then that is Conservative Councillors for you; re-open the wound again by all means in another Council meeting. Laughable.   

Journalists also have been telling me that Medway MPs are making a virtue of their rebellious status; this only happens at the fag end of any government as people seek to flee a sinking ship.

Coupled with the loss of AAA has been a little commented upon devaluation of our currency on the FX markets in recent weeks, coupled with dithering in the Bank of England over further Quantitative Easing. In short investors are spooked that the government misjudged the recovery and adopted a flawed economic strategy; this is the position the Labour Party warned about and the facts on the groud, not just the politicians on the TV, show this to be happening. If in doubt; follow the money; and its going out of the UK. Investors are also spooked about the potential to leave the EU; one of the key reports from David Cameron's visit to India from some news outlets was the question marks on Indian investors on decisions that need to be made over the next couple of years on whether we are in a single market or out. Cameron cant tell them.




George Osborne can distance himself all he wants but the Tories put AAA status and the coveted one-cycle deficit reducation plan as the cornerstone to electoral credibility [as stated in the manifesto above]. Put simply both have failed; whilst the national debt continues to creep up and up the rating agences have concluded the strategy was wrong. The choice Osborne made in 2010 was wrong.

People still, rightly or wrongly, believe still believe the spoon fed lies from the elitist Conservatives that it was one government in one country that was to blame. It is time Labour showed where the real blame lies; a Bullingdon boy elite in Number 10 and 11 that simply have no clue as to how to run a country for working and middle income people. People know the Tories are out of touch and dont have the right instincts; all polling shows a massive opportunity for Labour to nail the last great lie of our times; that you cant trust Labour with the economy. 

The Tory economic plan has failed; you can't trust them on the Economy any more


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