It seems that every time we have a Labour government, the country ends up with a massive structural budget deficit: i.e. Labour Governments embark on a programme of public spending which is greater than the tax revenues they can reasonably expect to gather, even when the economy is running well.
Of course, when the economy is not running well, the deficit gets much worse but the structural part of the deficit will remain even when the economy recovers - unless public spending is cut back.
So why do Labour governments have this tendency to spend more money than they are able to gather, more than the country can afford, with the result that they have to borrow?
It’s a serious question.
Of course it may be, as some Conservatives believe, that Labour Governments are simply incompetent, well-meaning but incompetent.
They have a long list of measures that they think will improve society and they really do want to see the measures implemented. They don’t really care where the money comes from. They don’t even know where the money comes from. They just want to “do good” and let the money sort itself out.
But, if that is the case, they would have to be somewhere on the scale from short-sighted to unbelievably stupid. As soon as the budget deficit gets too large, we either have to cut back savagely of our own volition (usually after an election which Labour loses) or we have
the cut-backs thrust upon us by the money markets who are perhaps less good-hearted but definitely better at managing money.
So let’s assume Labour Governments are not short-sighted or stupid. Why else would Labour Governments do what they do? Well, they wish to change society so perhaps they have a more revolutionary motive. Could it be that they wish to engineer a financial crisis so great that we are compelled to confront the undoubted flaws in and the inherent instability of the capitalist system? It’s an interesting thought.
If that is the case, it’s worrying on two counts. First, it would be deeply deceitful to set out to destroy the existing financial system without being open about the objective. Not very democratic!
But even more worrying, what are they proposing to put in place of the existing system if they succeed in destroying it.
There’s a lot wrong with the present system. It is often very unfair and unmeritocratic. It is also sometimes pretty inefficient. And it relies on the premise of continual growth which on a planet with finite resources may be a dreadful premise on which to base an economic
system. On the other hand, we have seen how the command economies of fascism and communism are even less fair and even more inefficient.
So what are these hypothetically revolutionary Labour Governments offering? Where is the ferment of intellectual activity out of which a new fairer, more efficient economic system will emerge? Nowhere!
If you’re a traditional socialist, you might suggest the answer is simple - Socialism, the urbane, civilised, socialism that accommodates a mixed economy (perhaps on the Swedish model or what was the Swedish model). Fair enough. Not everyone’s cup of tea but a suggestion worthy of consideration.
But if that is the goal, you can’t run a massive structural deficit because you’re not changing the system, you are working within it, and we know how the system deals with governmental extravagance and irresponsibility.
So I’m afraid I’m veering towards the “short-sighted/unbelievably stupid’ explanation.