Mervyn King, Governor of Bank of England and he who prints the money, is speaking at the TUC conference in Manchester today (indeed, as I type)
One line in his speech has already generated lots of excitement: “the causes of the crisis may have been rooted in the financial sector.”
Cue hysteria from many that this is proof the bankers are to blame for everything.
A further paragraph should highlight the real point, but no. King said: “There was nothing fair about the financial crisis. It was caused not by problems in the real economy; it came out of the financial sector. But it was the real economy that suffered and the banks that were bailed out. Your members, and indeed the businesses which employ them, are entitled to be angry.”
And he’s right. The issue is, he’s talking about the financial crisis. Which is quite different to the budget defecit, the reason for spending cuts. Will the left recognise that? Probably not.
The ONS produces a nice little graph to illustrate the point, illustrating the impact of the financial bailout and the level of public sector debt without the bailout.
The point? The banks are responsible for a great deal - and there are a whole host of actions that should be taken - but let’s not pretend that they are responsible for the spending cuts to come. Even without the banks, the country is way beyond prudent Mr Brown’s “sustainable investment rule” of debt not exceeding 40% of GDP. And that’s without PFI or pension debts fully included.
The choice isn’t between bailing out banks and cutting spending - and anyone who says it is simply denies the facts.