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The ones who caused the crisis laughing all the way from the bank

Posted on 20 October 2010 | 3:10pm

Just caught sight of Communities Secretary Eric Pickles on TV trying rather unsuccessfully to maintain that the George Osborne package was ‘progressive’, followed by a man in the City saying that it was a dreadful day for the public, but a great day for the government.

Needless to say, in keeping with the media’s treatment of men in suits in shiny financial centres, the man in the suit in this particular shiny financial centre was not really pressed on this observation. It is worth however taking a closer look at what he said – dreadful for public, good for government.

Dreadful for the public because the jobs and services on which lower and middle income families depend were being chopped left, right and centre, and there will be many many devils in the detail still to come; good for the government because the men in the suits in the shiny financial centres who did so much to bring about the financial calamity which has led to the debt crisis which has led to the cuts pronounced that it was tough enough. Something a bit odd about the causes of the problem being deemed to be expert commentators on the attemped cure.

Despite the talk of a bank levy, the origins of this crisis are pretty much lost now, not least because of the coalition’s impressive self-brainwashing that everything was Labour’s fault, which has had some success in framing the media coverage.

But the reason Mr Pickles looked uncomfortable is because he will be feeling uncomfortable; because he knows that the people who are going to be hit the hardest are those at the bottom end, while those at the top will do fine, and the ones who caused the crisis in the first place are laughing all the way from the bank. When it was suggested to Mr Pickles that the Insitute of Fiscal Studies’ early analysis showed this to be a regressive rather than progressive move, he blathered on about how the government would do its own analysis. Silly me for thinking they might have done that already.

  • JW

    The reason for the harsh cuts is Labour’s overspending, no? If they had run a surplus rather than a budget deficit and not allowed to the role of the state in the economy to reach such an unsustainable level then we wouldn’t have this current problem. I’m not saying bankers or other such hate figures should not be blamed for their role in the crisis, or that Labour should have stopped them as hindsight is a wonderful thing, but the sustainability of public spending should certainly have been questioned.

  • Hampered

    Alastair, Our paths crossed in the late 90s and early 00s. Mountfield review and other things including what seemed like crisis after crisis. Happy days – long hours, rubbish pay, public information, public service. I was made redundant this morning.

  • Elaine

    One under-reported and unchallenged aspect of all this is the Con/Dem vacuous reliance on the “what will the credit-ratings agencies say unless we cut this drastically. ” As John Eatwell put it in the Guardian: ” These are the same clowns who assured everyone that securitised sub-prime mortgages were AAA rated.” And while in the USA there were – at least – some Congressional investigations and critiques of these agencies, here their sway seems unassailable.
    Just a footnote….

  • Olli Issakainen

    The nasty party is back. And this time they have also brought their friends!
    The cuts are used to reshape the economy in the interest of business and to trash public sector. This all is done at the cost to consumers and environment.
    As Naomi Klein has said in The Shock Doctrine, “disaster capitalism” is an idea by extreme neoliberals at the University of Chicago. Their aim is that public sphere should be eliminated, business should be free and social spending stopped.
    Milton Friedman stated that this could not be done under normal conditions. Only “a crisis produces real change”.
    David Blanchflower has warned that cuts programme could cause a bigger crisis.
    George Osborne´s economic strategy is based on hope that the private sector will create 2.5 million jobs within five years. This will not happen.
    There is no evidence that fiscal tightening on this scale has ever worked. So there will probably be another recession.
    The joint statement by first ministers told that private sector demand remains fragile and access to finance continues to be constrained.
    The economy is slowing.
    According to Osbornomics private sector will fill the void left by public sector cuts. But consumer demand is down, and exports will not help.
    The deficit is more likely to rise.
    Today´s shock treatment will only accelerate the economy´s slide back towards recession.
    People in glass houses should not throw bricks. The Tories supported Labour´s spending plans until November 2008. Then they got the recession completely wrong.
    When the global financial crisis which started in the US hit Britain in September 2008, the debt was low. The budget of 2007 estimated Britain´s structural deficit at only 1%! It is now close to 8%.
    In recessions deficits go up automatically as tax revenues are lower and unemployment higher.
    Britain entered the financial crisis with low inflation, low interest rates, low unemployment and low debt.
    It can be said that Gordon Brown should have regulated the City more. But not by the Tories! They wanted light-touch regulation of finance.
    Anyway, hindsight is the easiest form of virtue.
    In fact, Gordon Brown´s recapitalisation plan rescued the global financial system.
    People voted for change. Today they got it!

  • Psykes

    Its ok the 35 business leaders who support the cuts are going to employ the masses of unemployed……………….they said so!!

  • Clare Mccarthy1

    George Osbourne reminds me of the wolf in Little Red Riding Hood. Today he has shown himself for what he is and what the party he represents is about. How long are they going to use the old chestnut of it being Labour’s fault? Yes they did spend money,but not to buy sweeties ! Look at the NHS and how much better it has become. Look at our schools. Bus passes,heating allowances. Perhaps they should have saved for a rainy day, but there again did we account for Lehman brother’s and other greedy bankers. All these people who are attacking Labour’s policies are the very people who have enjoyed the benefits. To have a happy society we need Social Justice and unfortunately that’s not what this government is about. How can they cheer a chancellor who is willing to cull nearly 490,000 jobs ?! These are real people !

  • Mark Hinchcliffe

    Quiet cruelty in the CSR.

    George Osborne and Danny Alexander today announced that a number of people claiming Employment and Support Allowance (ESA) would be limited to a year of benefit payments. Around one million people who are disabled or who have health conditions will be affected by the change.

    An individual on ESA can receive between £91 and £97 per week, depending on the severity of their disability or health problem.

    ESA claimants will be migrated to Job Seeker’s Allowance (JSA) if they cannot find work within a year, a shift that will see their weekly income drop by around £40 per week.

    Disabled people take a lot longer to find a job due to issues such as transport and employer discrimination and a large proportion of disabled people will take more than a year to find a job.

    They will then face a sudden week drop in income when shifted to JSA.

    Furthermore, if you’ve been on JSA for over a year, your housing benefit is cut by 10 per cent. A third of people claiming benefits for incapacity are receiving housing payments.

    If you can’t get work on ESA, you will have to try to get work on JSA.

    The government are withdrawing cash and withdrawing support.

  • s chapman

    How did I guess that you my Finnish friend would be first to blog back to your master…..all nonsense as per…
    Do you not qualify Northern Rock and other Building Societies going belly-up back in early 2008 as the start of the crisis ?
    If we had such a formidable financial footing pre-crisis as you suggest why have we gone to rock bottom in the G20 for our budget deficit? Answer please?
    You litter your blog saying that the economy is on the wane and that the private sector will not take up the slack and provide jobs for those “poor poor” public sector workers who will loose their jobs.Well,they need to get in the real world and share some of the pain that the rest of us have had to deal with.You seem to almost wish the British economy ( you are Finnish ) will fail and go into a double dip which I find so immature and quite disgraceful – what don’t you get about the fact we are in a black hole of debt and we need to address it NOW !
    You still won’t tell me as to why the banks were allowed to lend so recklessly and to have very poor quality balance sheets in the boom times? Who saw the figures day in day out…..can I suggest it was the Treasury and the Chancellor – did they not also see the personal debt mountain rising ?? Of course they did and did NOTHING , nothing ok….zip – they rode this debt problem and employed 1m extra public sector works and asked for no accountability in return or to keep waste to a minimum….they blew the public sector bubble up and now its popped – well done Osborne back to leaner Govt , less waste and more for our money…
    and btw my Finnish friend – hindsight is as virtuous as forecasting – you don’t know the future…how do you know exports won’t help , how do you know that private sector demand won’t rise , how do you know banks won’t release more finance….

  • Stevebrundish

    If the cause of the deficit is Labour’s over spending then it is also Cameron Clegg’s as they both supported the spending commitments made before the banking Crash. But lets not let that fact stop DC from trying to distance him self from the cuts. This may be good spin but its pretty poor leadership. If he believes this is good for the country he should have the guts to stand up and say so and not hid behind slogans blaming others. The cuts are really about shaping public services in post deficit Britain, with the poor getting poorer, midddle England getting squeezed and the bankers bonuses rolling on and on. As Alan Johnson said today this is what many of the Tory MPs came into politics for. Truly one must say Mrs Thatcher’s children.

  • Steven

    It`s galling that the BBC, amongst others, encourages the following: the private sector started suffering 3 years ago – now it`s the turn of the public sector. DC, GO, NC etc must love that as the bickering just muddies the waters. I worked in the private sector for 15 years and in the public sector for the last 2 years. The great majority in the public sector comprises decent people who work hard. It`s the same in the private sector (except that the top dogs in the banks played games with our money and lost). Labour needs to be a fox/pitbull hybrid – cunning and relentless.

  • Amcshane

    I am so sorry!

  • toni

    Why would any employer take on someone with physical or mental health problems who have been moved off ESA onto JSA when there will be thousands of public sector workers available with current work experience and a good CV to choose from.?
    As for those 35 companies who through a letter in the Telegraph support the Govt.less than a quarter of them will be creating new jobs next year, as revealed by Sky’s business editor.

  • Hidden away in the cuts was the bombshell that disabled people in residential care will lose their cars, and instead get around £25(!) to live on per week after the deductions that are being taken to cover their care.

    An absolute disgrace, what part have the disabled had on this crisis? Why should we stop their provision and support?

    If the cuts were so needed, Osborne and Cameron would have opposed them in 2008 vocally, they did……………oh no they didn’t! Cameron and Gideon promised to match them pound for pound….

  • Why were Cameron and Gideon promising to match spending promises by Labour pound for pound in 2008 if that was the start of the crisis?

    The start of the crisis was the banks collapsing, possibly the best thing Labour ever did was step in to save them, take on the debt but also part / majority ownership.

    It’s not like we got nothing from the deal. The Tories approach is akin to selling off all your household possessions to pay off your mortgage.

  • Mr Pickles, was he in Thomas the Tank Engine? It was surprising what he said!

  • Chris lancashire

    The origins of the crisis were Gordon Brown running a defecit year in year out right through a boom culminating in the last few years in £50bn annually.
    The banks cost a one off £100bn, most of which will be recouped in share ssell-offs. And remind me who altered bank governance in 1998 leading to the total laissez-faire regulation of banking.

    Until Labour takes responsibility for what happened it will have zero credibility in its critique of the coalition.

  • TomJ

    I must say, this ‘Gideon’ business is very witty. Shall we start referring to Edward Miliband too ?

  • just need to re-emphasise – the best “we are all in this together formula –
    richest pay proportionately more, not less than the poorest
    – that way lies some restoration of sanity to the 2% owning 98% of the wealth farce.

    and we train the new jobless to be good bankers…( they might be able tolerate bonuses of just having a secure job that pays all the bills.)

    to replace all those who piss off to Switzerland or wherever in order to desperately hang on to lower tax margins so they can feed their children on foie gras until doomsday…

    It really does look as though it wouldn’t take much skills training to get some of our own less well off to do a better job than most of those sub-primates.

    so Mr Heseltine and others views be damned – UP THE TAX RATES AND LET THEM LEAVE…

  • alienfromzog

    Good point.

    The public sector, as we all know, exploded in size from 1997 to 2008.

    In 1997, public sector spending was 38.35% of GDP.
    In 2008, public sector spending was 39.75% of GDP.

    I think we can all agree that the 1.4% is the key to whole crisis.


  • Janete

    People with physical or mental health problems find it hard, if not impossible, to get jobs at the best of times. The truth is the Tories (and now the Lib Dems) just don’t care!

    Yesterday on the Daily Politics, Robert Peston asked Danny Alexander, where would a family live if they could no longer afford to rent in the private sector and social housing costs were beyond their means. He just ignored the question.

    The 35 companies intervened because a small state, high unemployment society suits them just fine. If lots of people are out of work, with low level benefits, it makes them desperate. They will then accept low wages and poor employment conditions and that leads to bigger profits.

  • s chapman

    If you are long RBS and Lloyds shares mate god help you !

    And,the Treasury and the Chancellor saw the figs every day from lending institutions….and if they didn’t they should have…and by defintion Steven when you at the start of a crisis,as you say, you don’t know the end…the real story was only known a few days after the election

  • Janete

    Yes, and their rioting on the streets of Paris because of it!