by Gordon Brown
Other equally contentious claims were also used to justify austerity: that even in the depths of a recession, government spending crowded out private investment and put upward pressure on interest rates; that a national debt beyond 90 per cent of the economy’s size could cut – even halve – the rate of growth; that deficit financing itself destroyed confidence. Yet in 2009 none of the anti-stimulus arguments the Conservatives deployed made much economic sense. In fact, despite initially criticising us, the IMF later found that deficit financing in a recession was sound and that the impact of fiscal stimulus on restoring growth was much bigger than previously thought. They had underestimated what they called the ‘multiplier effect’.
To those who alleged we should have put the country in a stronger fiscal position before the crash, I answer that we had low debt by historical and international standards; that there was fiscal tightening from 2005 to 2007; and that, while we had made major improvements in health, schools and policing, public spending’s share of national income – and thus the size of the state – was smaller than it had been for most of the Thatcher period. This was hardly proof of profligacy.
There are, of course, legitimate questions. Should we have had fiscal rules set not over the cycle but over, say, five years? Should we have aimed for a declining debt ratio rather than a simple target of keeping it below 40 per cent? Should we have focused as much on the flow of debt than on its stock? But these questions, in effect, are different ways of asking the same thing: should we have anticipated a global recession as deep as the one the world suffered?
‘All economies recover in the end,’ Skidelsky writes, ‘the question is how fast and how far.’ The fact is we recovered under Labour and then growth stalled under the Conservatives. Current estimates suggest that the UK pulled out of recession in late 2009, and contracted in two quarters after 2010: both in 2012. Following 2010, GDP growth slowed considerably. Osborne’s austerity brought weaker growth and by the end of 2011 unemployment rose to 2.68 million and 8.4 per cent. The current budget deficit actually increased by £8 billion between 2011 and 2012, while net borrowing increased by £14 billion over the same period. The Office of Budget Responsibility has calculated that austerity reduced GDP growth by 1 per cent in each of these two years.
In July 2012 the IMF, which had initially criticised us, came out in our favour, suggesting that ‘more expansionary demand policies would close the output gap faster’. Their economists have now moved to the view that contractionary policies were not the way to deal with the post-2008 crisis, and proactive fiscal policy had to be pursued alongside monetary policy to facilitate and assure a strong recovery. I put the point more starkly: had we not acted as we did there would have been around a million more job losses; thousands of businesses – whose tax payments we deferred – would have gone under; and hundreds of thousands of homeowners, who faced negative equity, might have had their homes repossessed. And the 2008 recession would have lasted longer.
As it happened, we quickly brought the economy back into growth. Then a year later the Tories undermined recovery – not because their brand of austerity was the only possible option but because they seized on the crisis and made an ideological choice. However, Keynes was right and they were wrong. In normal circumstances, demand management could be left mainly to interest rates, but the highly unusual slump conditions of 2008–9 made fiscal measures an essential component of any recovery. Keynesianism may not have been right for every season, but it was right for this one.
The Conservatives would decry our policy as ‘imprudence’. But our policy to run a deficit was for a purpose: it was the right thing economically and morally not just to cushion the shock but to propel recovery – it was, I believe, the only prudent course.
In a crisis, you tend to focus on getting the policy right and at times neglect getting the message across. Under intense pressures, finding solutions becomes all-consuming. I knew that if we had any chance of succeeding we had to make what might seem like detail – our mortgage support, car scrappage scheme, tax holiday to save businesses – the essential building blocks of a comprehensive national mission to help each other. I also understood we had to explain why deficits were not inimical to responsible economics but the essential means of dealing with a global crisis as deep and wide as we faced. Nevertheless, I also recognised that what is essentially a counterfactual – the jobs, homes and businesses that were not lost – would struggle to be heard above the Conservatives’ propaganda that even new-born children were being burdened with unpayable debt. As David Muir warned me: the very mention of debt sends shivers down people’s spines; just like ‘incest’, he said, it has no positive connotation and is something to be abhorred.
The power of myth in politics can be stronger than reality. It is far easier to dramatise and exaggerate the horrors of debt than to convey complex arguments about automatic stabilisers and pro-cyclical investment. Deficits and why they are wrong are easier to explain than deficit financing and why it is right. Even now the fiction that any deficit, at any time, under any circumstances is unacceptable still has a stranglehold on the public mind.
On the rightness of running a deficit to stimulate a failing economy back to growth, we did not prevail in the battle for public opinion. I have to accept that our attempts at explaining what we were doing fell short. We fought the battle too little and too late. One reason was our unrelenting focus on wave upon wave of policy issues crashing around us. The financial situation was then so grave, the challenges so urgent and the stakes so high that my colleagues and I had a driving conviction that we had to get the policy responses right. And so, in a seemingly never-ending cycle of Cabinet and Cabinet subcommittees that I chaired – on housing, jobs, business rescues, bank support and so on – we were racing against the economic tides as we introduced measures to minimise unemployment, bankruptcies and repossessions. I believe that by 2010 we could demonstrate more success than any other recession-hit country including America. And as, day by day, we worked through the solutions and almost every waking hour was taken up thinking through the steps to recovery, the public knew little of the lengths to which we were going to protect their savings, their homes and their jobs.
In more ordinary times I could have been excused, perhaps, for focusing on the policy and not the explanation and presentation of it. But this was a national crisis. In a crisis, a progressive politician who advocates change and reform cannot sit tight but has to mobilise support.
I could and should have engaged in a continuous national conversation with the British people. I should have been out in the country every second day explaining how the crisis had happened, why we urgently needed the extraordinary expansionary measures we were enacting – why in the short-term the deficit would rise as revenues from taxation fell and we used the spending power of the Treasury to rescue the economy. I should have explained more clearly to the public, and over and over, that we were confronting a national peacetime emergency that required unprecedented interventions. But how?
With its focus on the cut and thrust of partisan debate, and with its aversion to the kind of set speeches favoured in America, the House of Commons can never be the arena for winning the battle for public opinion in economic matters. Parliament is a very different place than it was when Churchill, in a time of united resolve, rallied the country from the Dispatch Box. On any occasion in recent times when I, or for that matter anyone else, tried to speak directly to the nation at the Dispatch Box, such speeches have failed to break through. Any attempt to raise people’s hopes and their confidence will be drowned out in a cacophony which, sadly, thrives on petty point-scoring.
At one time speeches, whether in or out of the Commons, mattered – and were widely reported – but today almost any major set speech will swiftly fade in the ceaseless churn of the news cycle. So opposed anyway were most of the press to our party and therefore our policy that I had scant if any hope the print media would help me put the case.
In th
e interwar years radio was at its peak, and reassuring words broadcast to the nation could make a difference. Throughout the post-war years politicians competed for attention on peak-time TV and by the turn of the millennium it was usually six-second, eighteen-word sound bites that they relied on to make them household names. All the more reason that I should have taken any and every opportunity to deliver the message directly on TV and radio.
I thought of how, in the Great Depression of the 1930s, Franklin Roosevelt reached beyond the press barons who editorially assailed his New Deal and persuaded a commanding majority to welcome his great national endeavour of reconstruction. He is remembered for his ‘fireside chats’, broadcast at peak time on national radio and reaching 80 per cent of the radio-listening public, in which he countered prevailing fears by explaining in accessible language what he was doing and why. But by 2009 perhaps no politician, even ones far more skilled than me, could have successfully competed for a peak-time audience with soaps, sitcoms and game shows.
And as I tried to get our message across I found just how much the world of communications had changed – even in the ten years since 1997. Not only had newspaper readerships halved but television news was barely watched by young people.
No longer, as I discovered in 2009, is there what could be called a single national conversation. In a very real sense, everyone has a platform and with so many social-media outlets on the one hand and so many voices competing for attention on the other, mobilising national opinion is far harder than before.
In fact, Twitter and Facebook were turning the tables on TV. TV, it was said, allowed someone into your front room whom you’d never invite in through your front door. But you sat passively in front of the screen. Social media, at least in theory, puts the citizen in the driving seat – it allows you to say harsher things about people online than you ever would if you were face-to-face. In this new multimedia world, people using Twitter can effectively sometimes have a bigger megaphone than a prime minister. Indeed, by the time we left Downing Street, Sarah had more Twitter followers – 1.2 million – than I could ever dream of.
I desperately wanted to show what we could achieve as a country working together and perhaps some of our initiatives – on jobs for the young and the car scrappage scheme – did seep through into public consciousness for a time. But I never persuaded the country that we were part of a great national endeavour. I was not alone. No European leader or finance minister other than Angela Merkel and Wolfgang Schäuble (who became German finance minister in 2009) survived the financial crisis. In 2009 even Barack Obama found it difficult to get his message across. The popular mobilisation he had built to secure election in 2008 could not be so easily sustained out in the country as he faced the economic crisis and healthcare challenges of 2009 and 2010.
I held a series of public meetings, many question-and-answer sessions with business and did a host of regional visits, like the ones in May 2009 that I described in the Introduction. But by then even the BBC’s coverage of politics was now leading on debt and deficits – the Tory agenda – and not jobs; ignoring the reality that without government spending we could not haul our economy back to life.
There was another reason why we failed to communicate our message: I think, in retrospect, that I was too ready to assume – wrongly as it turned out – that we had done enough in the previous ten years to be trusted by the public to make the right economic choices. I felt that after a decade of managing the economy prudently, the public would, at the least, give us the benefit of the doubt. This assumption was instinctive on my part, an almost unquestioned political miscalculation.
So, in these crisis years we may have won the fight against recession; but even as we did so, we lost the battle for public opinion.
It was said of an early hero of mine, James Maxton, that he had every quality except one: the gift of knowing how to succeed. Strangely, perhaps, I felt up to all the demands of the day – for technical competence, command of detail and substance, managing and motivating a committed team, and most of all seeing the bigger picture – and felt undaunted by any of them. Indeed, I warmed to all these tasks. As I tackled the crisis, I felt that Downing Street was now seeing the real me, but the country was not. Despite all the experience I had built up working inside the media – writing, reporting and broadcasting – I found that no matter what I did to get my message across I often fell short. It was a tide that though taken at the flood did not lead to fortune.
In short, I believe that I failed to convince the public not because the policy was poor but because the communications were poor. I felt I had shown the courage to take difficult decisions and learn from adversity. But I should have gone out on the front foot to show why it was not imprudent to run a deficit in a recession. I write this not as an excuse, but to emphasise what I now know better than ever before and should have realised after our earlier and successful strategy building support for a tax rise for the NHS: the challenge is not just to do the right thing, but to bring people along. This is vital, and never more so than in a crisis. Even when ‘there is … vision [you can] perish’ if you do not instil confidence and hope in your plan. It is a lesson for anyone in a position of leadership in times to come.
CHAPTER 18
2010: LOSING AND LEAVING
Perhaps I am alone in thinking that the most remarkable aspect of the general election result in 2010 was that only 10 million people voted for Tory austerity, whereas more than 15 million voted for parties with policies to keep the economy growing.
The election was to deliver the first hung parliament since 1974 – the Tories winning 306 seats, Labour 258, the Lib Dems fifty-seven – and the first coalition government since the Second World War, but it will go down in history for ushering in the austerity years, which turned into a lost decade for Britain.
Most readers will be able to recall the Liberal Democrats’ subsequent breaking of their promise to abolish tuition fees. What is now forgotten is what lay behind it: that the Lib Dems stood in 2010 on a platform that demanded reflation and public spending – and then unceremoniously ditched that position. In their election manifesto, they had solemnly promised there would be no spending cuts in their first year in office and had even sought a slower deficit-reduction path than our Labour government. It was only in the aftermath that, in forming a coalition with the Conservatives, they sacrificed growth for austerity.
It was because we appeared to share a similar approach to growth and employment that it made sense to aim for a post-election deal with the Liberal Democrats, even though it was a long shot. I knew the difficulties of attempting such a course and some might even say that we were attempting the impossible. I would have not done so but for one reason: a commitment to completing the economic recovery spurred me on. In retrospect, it might have been better for the Liberal Democrats to have paid more attention to Labour: their failure to do so decimated them in the elections of 2015 and 2017. But that is not the most important point: what happened during the days of negotiations following the general election reveals weaknesses in our constitution that I feel merit attention.
For a long time, I had sensed how difficult it would be to win outright. Indeed, well before Tony Blair left office, public support had generally been moving away from us.
In 2010, the issue that was most important in the 2005 election – Iraq – had not been forgotten, but we also faced the fallout from the recession. As the previous chapter records, an unrelenting message from the Tories and the newspapers about debt and deficits had not fallen on deaf ears. I also had to contend with a general sense that, after thirteen years in power, both the government and Labour Party looked tired.
Worse was the fallout from the MPs’ expenses scandal, which had filled the news for weeks from May 2009 onwards. This cast a long shadow. Even MPs whose behaviour put them beyond suspicion felt the heat from an angry electorate. It was the shape of things to come, not only in the UK but across the West: political elites were increasingly s
een as out of touch, living well and governing badly within their own self-contained bubble. Over Iraq, MPs had been accused of lying. Over expenses, MPs were accused of cheating. And as allegations about ‘lying’ and ‘cheating’ became the order of the day, it was the government of the day who, perhaps understandably, got the blame. The Conservatives calculated that it was in their interests to do nothing to resolve the expenses crisis: even though it was a matter for all parties and the whole of Parliament to address, they rightly gauged that the question people would ask was: ‘What is the government doing to sort this out?’ Even if public feeling about politicians was ‘they’re all the same’, the blame did not fall equally and the answer was to throw out those in power. The full force of this anti-establishment revolt would be felt in the European Union referendum of 2016.
Perhaps surprisingly, even as we were weighed down by these multiple crises, we found that our poll numbers went up as well as down – up significantly in the run-up to and during the G20 as Britain led the world in responding to the recession, and then dramatically down in April when Damian McBride had to resign, and then yet further down after the MPs’ expenses crisis. But even then the polls recovered a little: the Tories were not trusted, especially on the health service. As our chief strategist David Muir observed at the outset of the election campaign, against the more pessimistic forecasts of those around him, Labour could still end up the biggest party.
I believed we also had a strong record in government. The minimum wage, which for one hundred years had been an undelivered promise, became the law of the land. Nursery education – a lottery for under-fives when we came to office – became a right. As I said at the Labour conference before the election:
