Perhaps the most depressing aspect of the Labour leadership contest is hearing the candidates acquiescing in the myth that Labour in office overspent – and, by implication, accepting the Tory framing that Labour crashed the economy. Of course it is more nuanced than that, but the outcome of the recent election shows that this is not a debate in which nuance plays much part.
The simple fact is that Labour did not overspend. In fact, as a percentage of GDP, New Labour spent less than Margaret Thatcher – an average of 41.5% of GDP against 44.2%. And in fact that figure hides the fact that after the 2007/8 crash, with the economy contracting viciously and rapidly, public spending as a proportion of GDP inevitably rose.
Moreover, spending is only one aspect of a deficit – you also need to consider taxation. And, again, Labour taxed less than Thatcher as a proportion of GDP – an average of 37.5% of GDP as against 42% under Thatcher. And, by 2007, public debt as a percentage of GDP was falling.