Skip to main content

How the Labour Government ruined Great Britain


How did Tony Blair and Gordon Brown ruin the UK?

After 18 years in the wilderness, the UK Labour Party was elected to office in May 1997 with a 179 seat majority in the House of Commons.It inherited a growing economy, falling borrowing, rising employment, a true golden legacy. So after 13 years of Labour rule, what is their legacy and how should we judge them? The landslide victory of Tony Blair to the crushing defeat of Gordon Brown 13 Labour years saw a massive shift in UK policy which changed the face of UK society.

Labour went on a massive spending binge and borrowed money, even though the economy was growing. It spent billions of pound more than the opposition would have done had the Conservative party won the 2005 General Election. It is in fact the desire to borrow and spend that has sealed the fate of every Labour government in history with each Labour period ending in economic failure and high public borrowing.

Most of the growth of the Labour years can be traced back to an increase in public spending and a large ncrease in personal debt. Personal borrowing fueled the housing boom and created an economic illusion that could not last forever. People felt richer and spent more. The economy grew fuelling more consumption leading to more debt.

As David Cameron said in his Conservative Party conference speech on 10 October 2012, Labour is "the party of one notion, to borrow" Labour has only one answer when in government and when in opposition, to borrow more money. See the Borrow more money part of Cameron's speech.

The election of a Labour government in 1997 is perhaps remarkable if we look back at the history of the Labour movement in Great Britain. After a landmark election victory for Margaret Thatcher in 1979, the centre ground in British politics was changed forever. By 1983 and the disheveled Michael Foot at the helm, Labour was almost annihilated receiving just 27.6% of the vote. With two more crushing defeats in 1987 and 1992 under the leadership of Neil Kinnock most commentators wrote off Labour as ever having a serious chance of form a government again. Despite its surge in votes in 1997, the party has actually polled very poorly ever since. In 2005 it received just 36% of the vote but won a comfortable majority.


Golden Economic Legacy

Stealth Taxes

The Chancellor of the Exchequer removed tax credits for pension funds on company dividends, effectively wiping out £75BN of assets and destroying confidence in holding shares. Many company final salary pension schemes close as a result. New accounting rules introduced by the government in 2001 hit the value of shares and worsened the looming pension crisis.

"It was the right decision for investment. It was the right investment for our pensions and the right decision for our economy"

Gordon Brown

The Labour government has inherited a Golden Economic Legacy of strong growth, growing exports, low inflation, falling borrowing and falling unemployment. Its first term in office was relatively benign, however seeds were sown and promises were made. Not least the National Minimum Wage which hailed the end of the narrowing trade deficit with the rest of the world and the surge in the public sector to make up the shortfall in economic activity and employment.

To which his reply was: "What am I supposed to do about this? Write a thank-you letter?"

Gordon Brown on the golden economic legacy

GDP growth came from both expanding the public sector and a debt fueled housing boom. Interest rates were kept too low, the government borrowed, despite the so called boom, people borrowed in the naive belief that Labour had abolished boom and bust, Browns catchphrase during his time as Chancellor of the Exchequer. Personal debt hit record levels, people remortgaged their houses to buy cars, go on holidays and fit new kitchens. All consumption, the productive economy was unable to keep up.

Labour was hailed in 2003 as keeping Britain out of a recession which hit Europe and the USA, but in reality it was the spend now on the back of a "golden economic legacy handed to us on a plate". Buying themselves out of recession, with borrowed money was one of Labours biggest crimes. It fuelled the belief that boom and bust was no more and created a dangerous notion that the money would never run out. It was a selfish act, Labour was obsessed with maintaining its "economic credentials". Would an alternative government been so paranoid about losing its newly found "economic competence" mantra that it would have allowed this to get so out of hand? Doubtful, Labour needed that money to pump up the economy because it could not possibly preside over a recession just 4 years into its government. it even cut the basic rate of income tax despite the fact that it was borrowing and that tax revenues were coming from unsustainable sources such as stamp duty of house sales and the City of London.

All of Labours growth was based on building the public sector and personal consumption. It could not have enjoyed the tax revenues it did without personal consumption and personal consumption was fuelled by personal debt as the productive part of the economy was choked off by government borrowing, government regulation and a growing government workforce.

The true annual average inflation figure for the 1997 to 2010 period is 6.8% if you include house prices. Think you are richer than you were in 1997? Forget it. Its almost impossible to buy a house on one average salary. UK growth is all built on debt, we may have consumed more but it hasn't been paid for yet. UK households are expected to be no better off in 2015 than they were in 2003.

Government borrowing was amongst the highest in the world in 2010, at 12.8% and only our debt profile (UK debt rolls over more slowly than any other country) and the fact that we are outside the Euro have saved us from another Labour induced IMF bailout. The national debt is £1TRN and rising with the tax revenue that Labour depended on having dried up. As the pension crisis was never seriously tackled we have several years of rapidly spiraling pension costs as the baby boomers start to retire and draw their pensions.

Personal debt stands at around £1.5TRN and the overall total debt burden (public, personal and corporate and financial) is the highest in the world at 950% of GDP.

Photo credit: Daily Express

Scroll to Continue

Labour Government and GDP

UK economy will be bigger than Germany by 2013?

In 2003 a UK government minister predicted that the UK economy would be bigger than Germany by 2013. This ludicrous prediction was based on the fact that UK GDP would surge ahead whilst GDP in Germany would stagnate.

This prediction shows exactly why Labour are not fit to run the finances of a village fete, let alone the nation. Yes GDP surged ahead under Labour but at what cost? 100's of Billions of pounds that are going to be taken out of the economy for decades to come just to pay for 1 decade of excess.

The German economy is surging ahead, unemployment is falling, it has a huge trade surplus, its citizens are not laden with debt, it has a huge number of SME that will power the economy ahead. In the UK we are faced with the bill for 2001 to 2010, have a much reduced productive economy in which to pay it and have a huge population who are not only reliant on the state for all or part of their income but who also believe that they are entitled to it.

Public Spending

Friendly Overspending

One quarter of the deficit is directly due to the difference in spending levels between Labour and the Conservatives at the 2005 general election, £35BN, Labours own figure. You could also speculate that there is around £7bn overspend on public sector wages.

Using that Labour party figure,there would now be £42BN each year not being borrowed by the government and we must presume that somebody somewhere still has this money to invest. The real question is how many private sector jobs, overseas earnings and tax revenues does investing £42BN in a private business generate as opposed to buying £42BN of government debt?


Dependency Culture

Something for Nothing

Its tax credit policies destroyed the incentive to work and increased the notion of a dependency culture with even people earning upto £60,000 being able to claim benefits. Ministers saw nothing wrong in taxing people simply to give them the money back as a tax credit, in fact they revel in embedding the "dependency culture" in the national phsyche.

It can also be argued that the billions of pound overpaid in tax credits in 2003 to 2005 actually gave enough of a boost to the economy to prevent the UK entering recession. This meant that no brakes were ever applied to the economy for 16 years reinforcing the false mantra that boom and bust had been abolished.

PFI, whereby the private sector is supposed to provide public services and provide value for money to the taxpayer has in some cases cost the taxpayer 12 times as much with reports of hundreds of pounds bill to replace light bulbs and move beds in NHS hospitals. Poorly negotiated deals have left the taxpayer with a £60BN bill to pay.

Almost 1 million new public sector workers were taken on during the period of Labour rule, adding billions to future pension liabilities and massively increasing the size and cost of the public payroll. In addition to this, public sector pay rises were significantly higher over the period with some areas public sector pay being 30% higher than the equivalent local pay in the private sector. Of course you can win a pay negotiation if you have a sympathetic employer, namely the Labour Party!

image credit:


And with what authority did Labour inflict this damage on the UK? 36% of the vote!!!!, but they got over 100 seat majority!!! Yes the electoral system is heavily skewed in favour of the Labour party as more seats are allocated to Scotland and Wales and certain parts of England than is proportionate to the size of the electorate. The evidence of this unfairness is plain to see in the last to General Election results, Labour 2005, 36% of the vote, 66 seat majority, Conservative 2010, 36% of the vote, no majority. In fact the Conservatives actually won the 2005 election in England, securing several hundred thousand more votes than Labour.

So there we are, some of Labours more memorable moments that cost us dear!

How Labour ruined the UK - Labour Legacy

Labours fault?

Is it mostly down to Labours poor economic management of the economy or would the UK not been faring much better had Labour never come to power?

British Government



Liberal Democrat and Conservative Government

Dealing with the deficit

Government borrowing for September 2012 has come in below expectations, taking some of the pressure off George Osbourne ahead of the Autumn Statement on Wednesday 5th December. Whilst government borrowing is still at record highs, it should mean that government borrowing for the financial year will be lower than expected.

The figure is lower than analysts had been expecting, while previous months' figures for this financial year were revised down by a total of £6.7bn

August's record figure of £14.4bn was revised down to £12.8bn.

The government wants to wipe out the structural budget deficit by 2015, but analysts say this is unlikely.

Public borrowing for the financial year-to-date now stands at £38.6bn, compared with £62.8bn this time last year. This takes total government net debt to £1,065bn, equivalent to 67.9% to total annual economic output.


Labour Government of the 1970's

Labour in Power 1974 to 1979

Culminating in the Winter of discontent, a vote of no confidence and losing the general election; the 1970's saw the Labour movement and socialism at its peak in the 1970's followed by almost annihilation. In 1976, Britain went cap in hand to the IMF (International Monetary Fund) for desperately needed loans. Massive cuts in public spending were agreed to with grave concerns from Washington that Britain wold become a siege economy, undermining its cold war strategy. In fact Britain was at risk of losing its influence as an economic and military power with the Polaris nuclear programme and the British contingent of some 56,000 troops in West Germany under serious threat. The withdrawal of the Baor troops would have been disastrous for the UK, ending its "special relationship" with the USA and the security benefits that go with it.

"We used to think you could spend your way out of recession and increase employment by boosting government spending I tell you that option no longer exists. And so far as it ever did exist, it only worked on each occasion by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step." James Callaghan, Prime Minister 1976 to 1979.

With rubbish bins uncollected, the dead lying unburied and millions of strike days lost, the Conservative party, led by Margaret Hilda Thatcher won a decisive victory in May 1979. Mrs Thatcher won with a 43 seat House of Commons majority and was to lead a government that would bring the UK back from the brink.

Labour Government 1945 to 1951

Post war Labour government

If we really want to get to the root of our current problems, we need to go back to the post-war Labour government of Clement Atlee. After the war the UK Labour government paid scant regard to rebuilding its industrial base, seeking instead to build the new Jerusalem, welfare and the NHS. US Marshall aid allowed other European countries to build themselves brand new factories. In the UK the little aid that the UK managed to secure, due to poorly drafted plans, was poured into the welfare state.

The UK, the first country to industrialise, squandered its only opportunity to rebuild its ancient and decrepit industrial base and would, for decades to come see its competitiveness and currency constantly diminished. Poor management and outdated work practices confounded the problem and trade unions, with Labour in power, sought to destroy private enterprise.

Mass nationalisation, propping up lame duck businesses under the guise of "industrial support" lumbered the UK economy with debt and uncompetitive industries culminating in the "sick man of Europe" tag of the sixties and seventies.

Triple A Credit rating

AAA credit rating

Ed Balls certainly knows his stuff!!! The course that he and his predecessors would have plotted after the 2010 general election would certainly not have given us a AA1 credit rating. Junk status, definitely, for this is a man and a political party who still don't get it. Their actions created our current borrowing requirement. You can't blame the banks, it was the Labour government that demanded the money and the growth needed to buy its supporters.

Labour are still calling for more spending. Spending that is in reality a call for generation X and Y to pay for the lifestyles of the baby boomer generation. They will get the pensions and assets that any further borrowing will surely provide and then in another twenty years a deeper crisis, gen X working well into their seventies and looking after their aged baby boomer parents who will have already sold their assets off long before to pay for care.

Jeremy Corbyn

On 8th June 2017, an inconclusive General Election has thrust the possibility of hard left-winger, Jeremy Corbyn, becoming Prime Minister. Whilst Theresa May's Conservative party won 43% of the vote and the most seats, a late Labour surge saw them pick up 41% of the vote, an extra 30 seats in the House of Commons and a real possibility that he could lead a coalition of left wingers, Labour moderates and Nationalists.

As Theresa May scrambles to form some sort of deal with the DUP, serious questions about the Northern Ireland peace process have been raised. The DUP are a unionist party with socially conservative values and possible links to loyalist paramilitaries.

Can we blame Labour for squandering a one-off golden economic legacy or were we headed for disaster anyway?

Jeremy Corbyn

Corbyn became leader of the Labour Party on 12 September 2015. His overwhelming victory in the leadership election demonstrates the extent to which Labour has lurched to the left since the demise of Tony Blair. Her Majesty's opposition is now headed by its most socialist leader since WW2. The man is fiercely critical of David Cameron's decision to extend British military operations against DAESH into Syria but a substantial number of his shadow cabinet colleagues defied him and supported UK involvement including Shadow Foreign Secretary, Hilary Benn.

His most prominent economic policy is to extend Quantitative Easing to start publicly funded infrastructure projects, controlled by the state.

Voting Intentiom

Did Labour waste a golden economic legacy?

csi-north on April 29, 2014:

Labour spent more money than it gained in revenue. Even an idiot such as I could work that out. Why, why, why oh why - do the vast majority of the British population still fail to realize this? A socialist economic model is unsustainable - and I'm not saying that the Tories are saints in comparison (far from it). But surely less borrowing and more exports through the promotion and establishment of British industry is a good thing? Maybe I just don't know enough...but don't bash Cameron just yet. He hasn't plunged us into a costly war, he hasn't created unnecessary civil service jobs, hence borrowing even more money, he IS doing something for Britain that he genuinely believes in, unlike that charlatan Blair...who took off to sunnier climes as soon as he got his last pay packet...

The Hatter (author) from Great Britain on January 11, 2014:

@anonymous: Clueless John, get back to MSE.

anonymous on April 16, 2013:

@anonymous: John you really are the clueless one!

anonymous on April 16, 2013:

Yes, labour ruined the UK economy and population.

anonymous on March 24, 2013:

What a load of clueless junk !

Keeps clueless idiots happy.

anonymous on February 23, 2013:

AAA we would be junk status if labour still in.

anonymous on January 10, 2013:

Booo Gordon Brown. You ruined this country and borrowed billions of pounds, saddling our children with a huge, crippling burden of debt.

anonymous on October 20, 2012:

Labour spent billions more than a Conservative government would have done. Public sector wages are still way ahead of the private sector even after 3 years of pay being frozen. Public pensions are still over generous and desperately need reform. Public sector workers even pay less national insurance than the rest of us.

The Hatter (author) from Great Britain on July 10, 2012:

@robertclarke: Thanks for your comments!! Our "democracy" is in many ways an elective dictatorship even more so as we do not have an elected Head of State and our upper chamber (House of Lords) is hereditory and appointed.

robertclarke on July 01, 2012:

A vey nice article. I often wondered how Tony Blair managed to stay in no.10 for so long and after reading this, it makes me question more. The thing that annoyed me is that Labour went to war with Iraq even though the majority of people voted against it. To me, this didn't sound like a democracy, it sounded like a dictatorship.

It is rumoured that he wants to be prime minister again. It'll be interesting to see what the publics reaction is.

Related Articles