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Labour boom was never sustainable, warn economists
Nicholas Cecil, Deputy Political Editor29 Jun 2009
Labour's economic good times were not sustainable as they were driven by hiring huge numbers of public sector workers and a credit boom, economists warned today.
The Organisation for Economic Co-operation and Development said that from 2000 to 2005 public-sector employment spiralled by 12 per cent, compared with just three per cent in the private sector.
"Despite the long-period of economic expansion, developments in recent years were less robust than in earlier years, suggesting that this good performance might not have been sustainable," the experts said.
"Export performance weakened while public expenditure expanded rapidly. Growth in recent years was unsustainable and driven by a credit boom."
The damning verdict came days after Bank of England governor Mervyn King warned that Britain entered the economic crisis with a fiscal policy "that was not sustainable".
A separate report today by City think tank the Centre for Economics and Business Research showed parts of Britain, the North-East and Wales, are becoming more dependent on state funding than Cuba.
The OECD warned that unemployment was still likely to "eclipse" three million by the end of next year, when debt as a proportion of national output would rise to a staggering 90 per cent. Downing Street insisted that this was gross debt, not net debt which was lower.
But the Government came under fresh fire for the state of the public finances after the OECD said it should be "more ambitious" over tackling Britain's soaring deficit. It called for "more explicit" spending cuts or tax rises to address a deficit expected to hit 14 per cent of GDP by next year.
The OECD is predicting Britain's economy will shrink by 4.3 per cent this year, worse than the Treasury is forecasting.
The criticism comes days after Mr King demanded tougher goals from Chancellor Alistair Darling to reduce an "extraordinary" public deficit.
Britain is on course to borrow a record £175billion to try to escape the recession.
Reader views (5)
Keith / Val - Nothing to say?
- Dave Davies, Basingstoke, Hants, 30/06/2009 09:30
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"Labour's economic good times were not sustainable as they were driven by hiring huge numbers of public sector workers and a credit boom, economists warned today."- Well I never!!!LOL
- Keith Lonsdale, Doncaster, 29/06/2009 16:39
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The financial mismanagement by Brown & Co is of truly staggering proportions. If the U.K. were a company, a special general meeting would have been called long ago to vote for new management, and probably to sue the existing management for incompetence amounting to gross negligence. But seeing that it's the U.K. and not a company, the incompetents get a right to stay in place for another 11 months to wreak even greater chaos.
- Phil Jones, London UK, 29/06/2009 16:06
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Shutting the gate after horse bolted me thinks...
- Ade, London, 29/06/2009 16:01
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Thank-you Gordon Brown and Co for your leadership, creating the conditions and ensuring this happened. We will see your name lit up in the history books.
I hope that future generations will rememebr all that you did for this country, and ensure those mistakes are never ever repeated again.
- Dave Davies, Basingstoke, Hants, 29/06/2009 15:31
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