Monday, September 08, 2008

The US Treasury Nationalises Freddie Mac and Fannie Mae

The US government has effectively nationalised Freddie Mac and Fannie Mae, the two mortgage groups with a combined $5.4 trillion in liabilities (about equal to the entire federal debt).

What's more they "seized control" - no pfaffing about trying to appease shareholders and having to deal with malicious hedge-funds-on-the-make as we did with Northern Rock. They're proper socialists in America.

For those gob-smacked by the American action because they thought that the USA was the acme of free-market liberalism, don't be. The superpower era of America has always been underpinned by the taxpayer and the willingness of government to intervene - whether it is the Fed slashing interest rates to rock-bottom or the military-industrial complex where tax money keeps vast defence industries going, or the pork-barrel system where tax money is used for all sorts of dubious things or the way the US taxpayer takes on the job that should be done by insurers and compensates people who deliberately build in hurricane zones, so that some folk have their house rebuilt over and over courtesy of that indulgent Uncle Sam. Americans have never actually practised pure free-market liberalism, they've merely preached it to countries like Russia in the 90's and hence destabalised and killed the fragile democracy there. In proper democracies (and the USA is a proper democracy), the free-market is always modified, controlled and underpinned by the representatives of the people.

The nationalisation of Freddie Mac and Fannie Mae is actually a good move, it reduces the uncertainty that kills economies. But it's also interesting in that, as I said previously, we are in an era of where government intervention is deemed to be good and markets are deemed to be foolish and wicked (in direct contrast to the early 90's when government was deemed bad and the markets were the heroes who rescued us from govt, especially as regards the ERM).

The recent Populus poll showed massive support for government intervention, including for one-off fuel-payments, windfall taxes to pay for it, and public spending on housing. Voters seem to be leaning left, which is at odds with the voting intention polls. But then the Conservatives have no policies other than increasing the inheritance tax threshold to £2 million, and the public are projecting on them a view that they would be more left than Labour. What will happen when the Conservatives have to unveil a manifesto at last?


Anonymous said...

Quite right - the US is living proof that you can fool loadsa people for loadsa the time. You might also have mentioned the demonstrably unfree Big Agriculture market that these evangelists of free market economics operate without a blush. It makes our CAP look like a bastion of laissez faireism.

Trouble with the Populus poll and similar is that that don't really ask if people would stump up more tax to pay for all the goodies they think HMG should provide. Windfall taxes would be but a drop in the proverbial ocean...

Anonymous said...

Populus shows that the public want New Labour to clear up the mega mess they have created: let's face it if this government hadn't wasted billions there could be tax cuts to help people now,instead they will be soon needing the IMF to bail them out.

As with all Labour governments thev'e run out of money,massive tax hikes,massive borrowing & then from boom to bust to IMF?

snowflake5 said...

New Labour haven't created a mess. "Messes don't produce elven consecutive years of growth - I note that the Tories are still too chicken to pledge to match our record on growth.

As for tax-cuts - we have cut the basic rate of tax from 23% in 1997 to 20% now. Other tax cuts provided by New labour are:

* VAT on domestic fuel was 8% in 1997, it's 5% now

* Stamp Duty threshold raised from £60,000 in 1997 to £125,000, and then to £175,000

* Abolition of the 2% employee N.I. "entry fee" payable on earnings from £0 - LEL, when earnings crossed the lower earnings limit

* Abolition of the 3% employer N.I. "entry fee" payable on earnings from £0 - LEL, when earnings crossed the lower earnings limit

* Child tax credit introduced and extended for families who earn £58,000 and below

*People with disabilities who got back to work entitled to tax credit

*Child-care tax-credit introduced for people who place their children in nurseries

If you run a small business,

*For businesses with turnover of up to £58,000, VAT is not charged at all.

*Automatic entitlement for business to reclaim VAT on bad debts after six months, introduced for the first time

*Small business corporation tax cut from 23% to 22%

* Corporation tax was 33% in 1997, it's 28% now

* Capital gain tax for long term business assets cut from 40% to 18%

* Entrepreneurs selling their business (technically "qualifying assets") can claim Entrepreneurs' Relief - a lifetime allowance of £1,000,000 of gain that will only be taxed at 10%.

* Abolition of withholding tax on payments of interest and royalties between companies in the UK.

The Tories won't be able to match us on the tax cutting front either, cause they are useless of course. I predict that if people are stupid enough to elect a Tory govt, they will put up VAT to 25%

Anonymous said...

All those so called tax cuts you mention are of course dwarfed by the average 100% council tax increases and business rate increases.
Surprising you didn't mention National Insurance Tax increases or maybe the annual £ 5 billion stolen from pensions.

You seem to be confusing a hand-out (tax credit) with a tax cut,not the same thing even under New Labour's rewriting of economics.

Anonymous said...

See also Sadie's Tavern re the myth of low taxation in the US "a bizarre collection of non-advertised state taxes, federal taxes, taxes for it being a Monday following a full moon and similar..."

snowflake5 said...

broncodelsey - methinks you are innumerate if you think business rates offset the cut in corporation tax. Think! A corporation making £100million before tax is saved £5 million by the cut in corporation tax. Do they pay £5 million extra in business rates? Of course not. And as the profits get bigger so does the tax cut benefit.

Of course they may well be some dunces in the Tory party who believe that it would help busines to put corporation tax back to where it was in 1997 along with business rates. But watch for the City to howl - they at least know that taxes on business have fallen under Labour.

Ditto with households. Council tax is small compared to what people pay in income tax, and hence the cuts in income tax offset by a long way any increases in council tax (especially if you have a two income household).

Regarding NI - yes it has gone up by 1% - but income tax has been cut by 3%, plus the LEL has been raised, and the "N.I. entry fee" has been abolished. Most people with GCSE maths will be able to work out that people therefore keep more of their paypacket than under the Tories.

Tax credits are effectively tax rebates, as they are only provided to those who earn. A benefit is provided to people who don't earn, and benefits are unrelated to income.

No future Tory will be able to match the Labour government's record on reducing tax for ordinary people. Tories won't be able to match Labour's record on eleven consecutive years of growth either. Nor on improving public services.

Anonymous said...

No governement will be able to match the economic growth over the last 11 years since the global economic situation is far worse now. So repeating the silly statement taht the Tories haven't pledged to match Labour's 11 years of growth is simply foolish, Gordon Brown wouldn't commit to that for the next 11 years either.

Anonymous said...

Snowflakes you are the innumerate one!
Income tax cuts more than council tax increases your having a larf!

My own council tax has increased by over £100 per month since New Labour was elected,can you remind me when my income tax was reduced by that much?

Of course you can't, you just seem to make it up as you go,its called fantasy economics!

Anonymous said...

Since 1997 the amount raised by the Chancellor of income tax,national insurance & council tax have doubled from £ 175 billion to £ 370 billion.....source Grant Thornton

British households have experienced the biggest tax increases across the western world since New Labour came to power......source O.E.C.D

Just the facts without the fantasy finance.

Anonymous said...


Can you please stop with the (just plain dumb) claims that Gordon delivered 11 years of growth. It's nearly as bad as his claiming 16 years of growth. It wasnt him. It was the global economy and a lucky state of affairs in the domestic economy. A big chunk of the prosperity post 2002 is down to the housing bubble and the financial markets bubble. Gordon isnt much to blame for this either, just as he isnt responsible for the growth of the past. But as PM he gets to deal with effect of boom and bust, just like all his predecessors.

No one can guarantee growth in the future. Gordon didnt create growth, he was just a lucky recipient of a buoyant global economy with a massive deflation in manufactured products thanks to the rise of the free market in China and India. He didnt even have to worry about direct competition in much of the manufacturing sector, because the UK dropped out of most of these businesses back in the 80s, and a lot of very inefficient business had been driven to the wall in the 80s. It has a service based economy and a very productive and rich centre for the management of capital, the returns to which grew dramatically due to the low returns to labour thanks to the vast reserve army of underemployed in China. Commodity prices remained low as capacity constraints didnt bite until a couple of years ago.

You dont seriously think the government can do that much to "ensure" growth in the short or long run do you? At best, it can spend tax revenues, so that a surplus in the good times becomes a deficit in bad times. This is what happened in 2001-3, it can tide the economy over for a very short period in a very moderate downturn. Gordon didnt then rein in spending, for which he should take responsibility - here the Tories are correct. But, it isnt the main reason for the crash.

A big portion of the present boom and bust is down to the way in which interest rates were set and the banks were regulated. Gordon bears a little blame for each, but not much - including asset prices in inflation targets is something that is much discussed in academic and central bank circles, but no good answer is available. Similarly the regulatory environment was poor, but in line with international norms. The tripartite system was a mistake, but no system is going to be perfect. But, then again, in previous cycles when the Chancellor set interest rates and regulated banks, most of the time, the policies didnt look quite as dumb when they were undertaken as they did in hindsight. But, they were dumb and in hindsight the policies were dumb under Gordon. Interest rates should have been higher in 2003-5 to cool off the housing market.

Gordon spent the proceeds of growth and I think he didnt spend them too wisely. This is a matter for debate.

As for the US being a free market place - their annual tax take relative to GDP was 27.3% in 2005 and that of the UK was 37%. (Sweden was top with 51.3%). The tax burden has risen under Labour.
What I do know is that the UK is now vulnerable to firms switching HQs due to changes in EU corporate law. A vast number of German firms have incorporated in England as a result of the EU law change. The UK is vulnerable to corporate tax rate competition with Ireland, and both Darling and Brown have added to the vulnerability by not providing a stable tax regime.

Labour have shot their bolt and spent the proceeds of growth. I think they have no ideas and just look like a busted flush (a lot like John Major's government).

The fact that people would like some extra cash and think that someone else should be sandbagged for it, is not a sign of left-wingery. It is a sign of badly asked question. If people were asked "Should your taxes be lower?", they would say "yes". Doesnt mean that they are getting right wing. It just means that they are out for number one. The big leftwing question is "do you think we should pay more tax for public services?" The answer to that question (in contrast to the past decade or so) I suspect, would now be "no".

The one point I would agree with you, is that the fetish for markets was overdone. Where I would disagree is the extent of regulation required. Sometimes it should be a light touch (Telecoms). Sometimes, the answer is just no (NHS). Sometimes, the answer is "difficult one guv, let's try this new patch" (banks).

snowflake5 said...

broncodelsey said "Since 1997 the amount raised by the Chancellor of income tax,national insurance & council tax have doubled from £ 175 billion to £ 370 billion.....source Grant Thornton

Yes, the total amount of tax has been increased even while the tax rate has fallen - and that's down to incomes and profits rising.

Just to give you a simple example:

Say you are earning the average wage of 14k in 1997 and are paying 23% in income tax and 10% in NI (total 33%), and the personal allowance is £4045. The tax you pay is £3285.15 Actually it's more, because LEL threshold in 97 was way lower than the personal allowance, plus there was the N.I. entry fee, but can't be bothered to do the calcs.

Then in 2008, you are earning average wage £25k, income tax is 20%, and NI 11% (total 31%), and personal allowance is £6035. Total tax paid is £5879.15.

The amount is higher despite the rate being lower because earnings have increased from £14k to £25k. The only way to reduce the absolute amount is to keep earnings from ever rising.

When Tories complain about overall amounts of tax, they are in effect pledging that in order to make sure the amount of tax paid never rises, they will ensure that earnings never rise. Have I got your policy position correct?

snowflake5 said...

ken said "Can you please stop with the (just plain dumb) claims that Gordon delivered 11 years of growth. It's nearly as bad as his claiming 16 years of growth. It wasnt him. It was the global economy and a lucky state of affairs in the domestic economy"

Here we go again with the myth that the global economy was what did it.

Here's what happened in the global economy - the 98 Russian default/Asian capitalflight/credit-crunch. Then 9/11, crash, and Iraq war.

The USA went into recession for eight months in 2001. Then in 2003 they cut interest rates to 1% and left them there till 2005, to prevent a double dip recession. Germany, France, Italy and Japan all went into recession in 2003.

How can you with a straight face claim that the above events prove that the global economy was benign? The problems were as serious as now.

If it was benign, then everybody would have had eleven consecutive years of growth. But they didn't. That's because Britain had New Labour and they had cretins like Bush and Chirac in charge.

The other point to make is that George Osborne has publicly stated that if he had been in power from 2001-2005 he would not have have loosened fiscal policy. Given the straits the global economy was in, Osborne would have plunged us into recession too, just like the USA, France, Germany, Italy and Japan. And his actions wouldn't have "saved for a rainy day", because such a recession would have wiped out tax receipts and all his "savings" and more!

It's absolute fallacy for Tories to pretend that the last eleven years happened by "magic" and that Labour had nothing to do with it. On the contrary, the growth could only have happened under Labour as the key elements (BoE independence, fiscal expansion from 2001) were policies only Labour would have enacted.

I know it sticks in your craw to admit that the Labour record was good - but accept it. We delivered what the Tories were incapable of, and will never be able to match.

Anonymous said...


The fact that you are not an economist really shows. The US hasnt been in recession since 1997 on the commonly accepted two consecutive quarters of negative GDP. It did enter a recession as defined by the NBER in 2001 - but this isnt the same thing. Many countries did do very well over the decade 1997-2007. You should forget technical recessions, the difference between 0.01% positive and 0.01% negative is pretty silly (Just as I dont think much of the Q3-Q4 UK technical GDP recession - taken over the year, the Germans are in good shape, the Italians (no recession) are in the crapper). Look at overall growth over the period. This is the global environment. The europeans and the Americans did well over the past decade or so. The minor slippages here and there matter little.

Let me show you the underlying numbers:

1998 vs 2007 GDP Real PPP adjusted
USA +55.1% (go GWB!)
UK +51.9%
France +49.6%
Germany +35.5%
Japan +38.9%
Italy +29%

1998 vs 2007 GDP Real PPP adjusted per capita

UK +45.7%
US +42.1%
France +41.5%
Japan +37.6%
Germany +35.1%
Italy +24.1%

It was a good time for the UK and the US. On a per capita basis it was the best time for the UK for quite some time, but it wasnt that unusual - France and the US are in the same ball park. The Italians with their reliance on light manufacturing and the Germans with their reliance on heavy industry and mid sized manufacturers did poorly as global manufacturing competition took off. But even so, growth was adequate. They also suffered from the higher interest rates imposed by the Euro and the runaway economies of the fringe - Spain and Ireland, up 85% and 106% respectively. So even with cretins like Bush and Chirac (and I do think they arent the brightest of leaders), France and the US managed to increase their GDP per capita by over 40%. The global economy was good. Unless you want to argue that last couple of percent makes all the difference?

Data taken from,45323734&_dad=portal&_schema=PORTAL&screen=welcomeref&open=/t_na/t_nama&language=en&product=REF_TB_national_accounts&root=REF_TB_national_accounts&scrollto=0

I went and checked the OECD database. France has not been in recession since the beginning of 2001. Italy and Germany were in recession in 2003. Japan was in recession in 2001 but not in 2003. But as I said above, this matters little in the context of the big picture.

It is true that Gordon ran the taps on public spending in 2001-3, but I dont think that is something to necessarily be proud of - it appears in hindsight that this was a mistake. (A mistake that a Tory government might well have made.)

What you fundamentally dont seem to "get" is that the government has little short term impact on the economy - yes, it can spend a couple of percent more of GDP for a year or two, but that it is about it. It can give a stable investment environment by not mucking around with tax rates, and in the long run it might be able to change productivity through schooling and skills training. It can create a slightly lighter touch economy. None of these things are worth much and they take time to take effect. Labour inherited 5 years of good domestic growth, a relatively light (for the UK) tax regime, a good (eg free) labour market, and an economy shorn of uncompetitive manufacturing industry.

The global boom came and Britain did well. But Gordon didnt have more than a walk on role with no lines. You can delude yourself, but it is true. Or what did Saint Gordon do? Command inflation to be low? Increase the return on capital globally? Oh, and I think that a Tory government would have spent lots in 2001-3 too. They always have done in the past. Politicians love to spend money. BoE independence probably wouldnt have made much difference - the inflationary environment was very benign. Perhaps a little more uncertainty, but not enough to knock more than a smidgen off growth.

Also Labour have now done a lot of damage - tax uncertainty, increasing labour market regulation, that will impede the economy in the future.

You see Bush and Chirac did nearly as good a job as Gordon?

PS Your tax stuff sucks as well. One cannot just look at the income tax rate, one must look at all forms of taxation. I personally think that Gordon has made a total balls of CGT - it should be levied at the same rate as income tax otherwise really bad things happen. Gordon has upped the rate of taxation on the overall economy slightly. He has also allowed tax bracket creep. One can lower the total tax burden by cutting the rate of tax. Your last argument on tax is beneath you - in order to get the total tax take to fall you just need to cut the rate of taxation, rather than limiting earnings.

Anonymous said...


However much you try to spin and use the'off the shelf' New Labour script,you just can't get away from the simple facts.

'British households have experienced the biggest increases in taxes across the western world since Labour came into power'....source O.E.C.D

Game,set and match!

snowflake5 said...

Ken - your growth figures comparing the USA with the UK start at 1997, and include the four good Clinton years (1997-2000 inclusive), when the USA did outperform the UK and quite strongly too.

But since the Compassionate Conservatives took control in 2001, the USA underperformed the UK in 2001, 2002, 2003, 2006 and 2007 and looks to underperform the UK this year too. GDP growth in the USA was just 0.8% in 2001, thanks to eight months of negative growth. Only a moron would look at that growth and say "Go GWB!" with a straight face.

Everyone knows that during the 90's there was a global boom on. No one is disputing this. And we also know that the Tories were running HUGE DEBTS that entire time - debt hit 53% of GDP in 1997. So much for "saving in the good times". It was Labour that saved during the period of 1997 to 2001, running budget surpluses from 98 onwards.

From 2001 the global economy turns nasty. This is the period you claim that Labour should have continued "saving", and you try to gerry your figures by deliberately including the 1997 to 2001 figures for the USA and France in order gee up the numbers in order to disguise their problems from 2001 on. But there was a problem from 2001 on. And if fiscal policy hadn't been loosened in the UK, we too would have suffered.

You make lots of dubious claims about "high euro interest rates" in order to excuse the German and French performance from 2001 onwards. Eurozone interest rates started to get cut sharply in 2001 and were at 2% from 2003 through to 2005. Real interest rates there were zero. Even if the Bundesbank was in charge alone of Germany, they wouldn't have gone lower. The eurozone had problems because they weren't able to loosen fiscal policy any further due to the stability and growth pact. Their fiscal situation barely budged during this time - both France and Germany were struggling to hold to 3% fiscal deficit they had from 2001 onwards, so there was no loosening from one year to the next during that time. We weren't in that sitution.

As for inflation - inflation expectations fell in the UK because the BoE was made independent. And The Tories wouldn't have made that decision, and wouldn't have been able to get inflation down because no one had any confidence in them. UK inflation has been lower than that in the USA and eurozone.

As for tax - taxes on ordinary people have fallen, and yes we've paid for it by collecting from windfall taxes on utilities and the 3G auction etc. It might suit you (and broncodelsey) to simply divide total tax by households to pretend that a households are paying morein tax than they earn - but it remains true that the ordinary person remains better off under Labour than under the Tories - taxes are lower, interest rates are lower, earnings are up and inflation is down.

As I said before, it sticks in the craw of people like you to admit that Labour did a good job in the last eleven years. And of course you'll go to any lengths to try to rubbish the Labour record - pretend there was no crash, no Iraq war, add the Clinton boom years to the Bush years to wipe out the problems that conservatives caused in the USA. But the basic fact is that Labour delivered eleven consecutive years of growth. Labour! None of our competitors matched our record. And all subsequent governments will be judged by our record. Accept it.

Anonymous said...

Snowflake, What a totally incoherent argument. You pathetically keep bleating about 1997-2007, but insist that for EVEYONE ELSE 1997-2000 doesnt count? WTF.

You keep changing your story because you are wrong. You pick little stats and then try to claim a sweeping generalisation. You said

"If it was benign, then everybody would have had eleven consecutive years of growth. But they didn't. That's because Britain had New Labour and they had cretins like Bush and Chirac in charge."

I pointed out that well, the US and France did have good growth over the past 11 years. So you then change your story and go I want to include 11 years for the UK, but only concentrate on the past 7 years for the US and France. OK. Let's compare them:

Real GDP Per capita PPS 2007 vs 2000

UK +28.7%
US +27.1%
Japan +26.5%
France +25.5%
Germany +24.3%
Italy +13%

Source: Eurostat

Wow, the UK under the Godlike Gordon outperformed the US (led by the chimpanzee like GWB) by 1.6% over 7 years and France (led by the comatose Chirac) by 3.2%. Grow up and accept reality - the global economy was the single major factor for UK growth over the past 11 years.

You cannot pick single year numbers and say the UK "outperformed". Look at the overall numbers over the whole period.

Inflation expectations? It has so little to do with BoE independence. Global inflation collapsed because of Chinese and Indian manufactures. I wont produce them, but you can check global inflation at eurostat.

In hindsight (and to a certain degree of probability at the time - say 40%) I would have curtailed public spending from 2004. This is the year when EU countries started to cut their deficits. I wouldnt have called for cuts in 2001 that's when spending was probably necessary. I also think that any politician would have spent money and been tempted not to cut spending in 2004.

snowflake5 said...

Ken - If you've been reading my blog, you will see that I've said repeatedly that the world economy faced serious headwinds from 2001 onwards, and the reason that we have had eleven consecutive years of growth instead of just four years of growth, has been down to the policies of Labour. In other words, the reason our performance has diverged from everyone else's in the last seven years is down to the decisions of Gordon Brown.

You on the other hand have been claiming that the entire period of growth under Labour has been down to the brief growth under the Tories in the 90's, and that global conditions have been benign during the entire Labour period, which is patently untrue.

The "benign global period" was actually the 90's. John Major managed a recovery from his recession due to those benign global conditions, and also due to coming back from a very low base economy-wise. He and Ken Clarke should have "saved" during that time, but they were spending like drunken sailors, and government debt was accelerating in the run up to 1997.

Labour from 1997 on did save. Then in 2001, when the global economy turned nasty, we spent.

You sneer at the fact that Britain outperformed the USA, France, Germany, Japan and Italy from 2000onwards. But this is the first time since WW2 that we've managed to do this. Under all previous governments including Thatcher and Major, Britain underperformed all those coutries.

To take our country from being chronic underperformers to being No 1 is a massive acheivement and it is churlish of you to dismiss it.

I agree with you that Bush and Chirac were cretins - but they are conservative cretins. And Major underperformed Clinton because Major too was a conservative cretin. You see a pattern here?

Anonymous said...

Snowy, didnt you know that the BoE deliberately stoked up the consumer debt boom and housing market in 2001 because they were under pressure from NuLab to avoid the recession? I.e. they made the problem we have now worse to try to protect their record back then.

You did know this, right?

Anonymous said...

I am the one who keeps proving you wrong, you are the one who just changes the goal posts every time. I notice you have given up trying to claim that growth was soooo much better under Gordon. Tired of being shown up eh?

But, you pathetically try to claim that the left is better than the right. Let me skewer you one more time. You said "Major underperformed Clinton because Major too was a conservative cretin"

On OECD figures US GDP per capita PPP between end 1992 and end 1997 grew 11.8%. Under John (cretin) Major, UK equivalent grew 15.1%. Doh, wrong again. Wow, your batting average is low.

The global environment was very good for the UK even after 2001 - primarily the lower level of inflation caused by Chinese manufactures and the lack of a manufacturing sector that directly competed with the emerging countries. The UK remains a relatively high inflation place, which is why the global goldilocks economy was important for the UK. This has nothing to do with Gordon. And you will notice global growth was pretty good.

What made Britain grow over the past 15 years is the benefit of Thatcherism and the dropping off of the costs of Thatcherism - the fact is that Britain grew more slowly than other G7 countries because of low productivity crappy nationalised businesses and a sclerotic labour market caused by rampant trade unionism. The cost of Thatcherism were the 2 million people who never found a job after the clear out. This is what led to growth outpacing that of the G7. Such a major structural change takes place over decades.

Generally, economists judge that right wing governments are better for growth than left wing governments, although there is a lot of noise in the data. The immediate impact of governments is low.

snowflake5 said...

Ken, I'm sorry, it's lame blaming "nationalised industries" for the poor performance of the Thatcher-Major governments. By 1987, they had privatised most of it. And then were in power for a decade after that, during which they had an almighty recession. The 1992 recession was caused by Lawson-Thatcher-Major idiocies. Namely in loosening fiscal policy at a time that growth was very strong, while at time same time holding down interest rates.

And then again, during the 90's boom, they were running massive government debt, and again trying to keep interest rates down despite inflationary worries. So much so that the first day of the Labour victory in 1997, we had to put rates up (and the newly independent BoE continued raising rates).

Inflation lowered in the UK because people had confidence in the BoE and hence inflation expectations lowered. That wouldn't have happened if the Tories had regained power because no-one had confidence in them.

The other contribution to lowering inflation was Labour's commitment to free movement of people. Normally when an economy grows strongly, labour markets get tight and wages start to spiral, causing secondary inflation. Opening our doors to the eastern europeans eased such labour market pressures. Tories opposed this policy bitterly as their racism and xenophobia overwhelmed any sense of advantage to our economy.

The reason we have had 11 continuous years of growth plus lower inflation during that period than the USA and eurozone is a) the independence of the BoE instilling confidence in the population as regards inflation expectations b) the increase in labour supply from eastern europe where we opened our doors to them immediatety in 2004, damping down wage inflation and c) Labour operating a counter-cyclical fiscal policy instead of the pro-cyclical fiscal policy of Lawson-Major.

None of these elements would have been in place had the Tories been in charge, ergo, had the Tories been in charge there wouldn't have been 11 years of economic growth.

Of course it chokes you to admit that Labour made correct decisions that Tories would have fluffed. And it chokes you to admit that Labour has done something extraordinary in having 11 consecutive years of growth. And it chokes you to realise that the voters now expect this sort of performance and that any govt that doesn't deliver it will be deemed a failure because they are being measured against New Labour. That is of course why you are so desperate to assert that governments have nothing to do with economic performance.