The Tories can’t have the Irish crisis both ways

by Pat McFadden

The UK government has been determined to paint our economic situation as a domestic one, blaming the Labour government for the deficit and thus for their response to it in terms of the spending cuts set out in the CSR. This politically-led approach to the crisis also requires them to play down or ignore the international nature of it. After all, the more they talk about common problems being faced by countries across the world, the more threadbare their case against the previous government becomes. It can’t all be Labour’s fault if a number of countries are going through the same difficulties.

You could see this approach reflected at the recent G20 summit. Instead of shaping the agenda as Britain did when Gordon Brown chaired the G20 summit in London last year, we appeared to play a marginal role, with little to say about how countries should work together, or what the response should be to the exchange rate tensions and the discussion of trade imbalances that dominated the summit. When the prime minister was asked what he had been doing at the summit, he said that he had been lobbying for England to host the 2018 world cup – a good goal to aim for but not the reason he was there.

Enter Ireland, with a flight of deposits causing a crisis of confidence in the country’s economy – and this after the country has implemented the kind of austerity programme the UK government is setting out on. Yet when government ministers talk of the Irish economy’s problems, they don’t want to talk about the Irish government’s fiscal policies. No. They insist that In Ireland the issue is all about banks, not the actions of the government.

This contradictory stance exposes their political strategy in the UK. How can it be all about banks in Ireland but all about Labour government profligacy in the UK? The truth is that the last few years has seen the unfolding of a banking crisis across the world to which governments of all stripes have had to respond. In the UK, the Labour government responded in a way that was determined not to let recession turn into depression. That’s the reason for the deficit, not government profligacy. And in the same way, it is a banking crisis that lies at the core of Ireland’s economic problems.

I hope the Irish economy recovers. It is true that as neighbours and trading partners, it is in the UK’s interests to have a healthy and stable Irish economy. But it does no one any good for our government to offer one version of events when it comes to talking about our own economy and another one entirely when talking about others.

Pat McFadden is Labour MP for Wolverhampton South East and a former BIS minister.


Tags: , ,


3 Responses to “The Tories can’t have the Irish crisis both ways”

  1. william says:

    In Ireland, the issue IS all about the banks, who were permitted by the non existent controls to finance a London property boom.That was down to the Irish government, which was also not a little corrupt.In the UK,there were TWO problems:the government had set up a structural deficit by spending way above tax receipts for years(one balanced budget in thirteen, how long was the Brown cycle?), and , second,the UK banks had also been permitted by the new Brown regulator, the FSA, to add further fuel to the whole of the UK property market.In Germany, one medium sized property bank went bust.In Ireland, all three major banks went bust, in the UK both the two Scottish banks went bust.THere has been no crisis whatsoever in Norway,Chile, Singapore, Brazil or scores of countries that did not adopt the policies of the abolition of the economic cycle.

  2. theProle says:

    You seem to have forgotten to mention the elephant in the room, which is the cause of most of Ireland’s pain – the euro.

    The euro caused them to have a bigger bubble than us, followed by a similarly bigger bust, due to interest rates being set to suit the German economy, rather than the Irish one. Now the Euro is the millstone round their neck – they can’t just devalue, the only way to balance their budget is to slash spending. The Euro makes their exports unattractive, while they are being undercut by countries such as the UK which has let it’s free floating currency drop.

    By comparison we have an amazingly strong position. Our deficit problem is smaller than theirs – we have got away without cutting spending in cash terms, they have had to cut cash spending values. We have also devalued our currency, (that’s called quantitative easing BTW), which inflates away our debts (i.e. its a form of stealthy taxation), while reducing consumption of imports and boosting exports.

    Had Brown run balanced budgets or better still surpluses, and refrained from asset striping the country to try and hide the extend of the deficits (look at the gold price now), then we would have been in an even stronger position, and could have probably got away without cutting current spending – in this case the Tories are justified in throwing all the mud available, as like it or not they are right.

    The irony of all this is it looks like the Euro is finished anyway – the Irish bailout seems to have just shuffled the problem on to Portugal… if we bale them out, then it will be Spain, then Italy… there simply isn’t enough cash out there, even with we bleed the Germans dry to bale out every Euro country in turn. So eventually the Euro will go down the pan, and it will be haircuts all round… all we are doing with Ireland is throwing good money after bad, in an effort to stave off the inevitable.

  3. Chris says:

    @william

    “In Ireland, the issue IS all about the banks”

    In every country the issue is the banks.

    “who were permitted by the non existent controls to finance a London property boom.”

    I don’t think Irish banks were financing London, if they had they might be in better shape as the London property market is still growing.

    “That was down to the Irish government, which was also not a little corrupt.”

    Its not just the Irish government, since Regan the mantra has been less regulation, government is the problem not the solution, etc. Ireland was a poster child for the re-birth of laissez-faire.

    “In the UK,there were TWO problems:the government had set up a structural deficit by spending way above tax receipts for years(one balanced budget in thirteen, how long was the Brown cycle?)”

    The whole point of Mr McFaddens article is that the coalition are spinning the British people a lie that somehow the current economic problems weren’t caused by the world wide financial crisis but down to government spending. Yet you pop up on the comments to puke up that very narrative, ffs. Have you really got a 1st in economics from Cambridge, william?

    The deficit before 2008 was about 2.5%, the borrowed money that made up the deficit was spent *only* infrastructure investment. The structural or cyclical makeup of the deficit is impossible to predict, it depends entirely on how much you think the economy will grow above or below trend. Attempting to slash the deficit too quickly will actually increase the structural element because cuts will decrease growth and increase the likelihood of the economy growing below trend. Its a self fore filling argument.

    “second,the UK banks had also been permitted by the new Brown regulator, the FSA, to add further fuel to the whole of the UK property market.”

    It wasn’t the structure of the regulator that was the problem, the BoE made plenty of mistakes when it was regulator – Bearings ring any bells, the problem was the underlining ideology of laissez-faire capitalism.

    “In Germany, one medium sized property bank went bust.In Ireland, all three major banks went bust, in the UK both the two Scottish banks went bust.THere has been no crisis whatsoever in Norway,Chile, Singapore, Brazil or scores of countries that did not adopt the policies of the abolition of the economic cycle.”

    The UK has been badly affected because of the dependence of our tax base on the city, something that Ed Miliband has identified and wants to do something about by having a more active industrial policy. The recession caused by the global financial crisis has affected every economy in the world, why else do you think the G20 agreed simultaneous action back in 2008?

    The hun has cornered the market in just about every export, Norway has huge oil wealth, Chile has precious metal wealth, Singapore dunno what it has and Brazil simulated its economy and massive natural resources.

Leave a Reply