What caused the UK to be in so much debt?

[poppet2]

 

This money has to be paid back and at some point a bank somewhere says you cannot borrow any more money.

 

That's rich coming from a bank.

 

The reason Labour over spent in office was for 2 reasons.

 

1. The Iraq invasion

 

2. Money borrowed to bail out the banks

 

Just imagine, they could have eliminated poverty if these two events hadn't happened, and probably won the 2010 election.

[discodown]

When my wife and I decided to buy our own house in 1972 there were strict limits on how much you could borrow.

 

If I recall correctly it was three and a half times the mans annual wages, the woman's wages were not taken into account as "she may get pregnant".

 

When banks replaced the old fashioned bank manager with salesmen/women who were more concerned with how much they could lend and how big their bonus was going to be the recipe for disaster was in place.

 

People tended to adopt the attitude 'well they wouldn't lend it to me if they thought I couldn't pay it back'.

 

The old adage 'if it looks too good to be true then it very likely is too good to be true' was forgotten.

Personal responsibility counts for a lot, when we bought our house in 2004 we had a figure in mind that we wanted to borrow that we had worked out we could afford the repayments on. When we went to get mortgage advice the advisor told us they could get us up to £50000 more. We told him he probably could but we couldn't afford that so we needed to stick to our budget, the look on his face was like we were going to take his favourite toy away.

 

Lots of people didn't make the same decision as us though, they took the money and the pain that came with it. Nobody forced them, they wanted the dream and then they paid and when they couldn't it got taken away from them and thats because of their choices.

[I1L2T3]

The Labour party only adopted that stance after it was proven it was the right policy.

 

The original Ed Balls strategy was to spend their way out of debt. That was the 2010 line as per his Bloomberg lecture.

 

Can you imagine the mess we'd be in now with that mug in charge. Even he's done a huge U turn on that policy.

 

That's why we can't trust Labour - all rosy when there is nothing to worry about, headless chickens in an economic crisis.

 

Actually the performance of the Labour government in dealing with the crisis 2008-10 gets a pretty positive appraisal from other leaders around the world and many leading economists. The most important thing he did before the crisis was keep us out the Euro despite the determination of Blair to see us join. Must also remember that UK government debt in 2008 was under 30% of GDP.

 

Only really in the UK that it doesn't register that many of Brown's actions have actually helped us.

 

http://www.bloomberg.com/bw/articles/2013-09-12/gordon-browns-u-dot-k-dot-economic-record-a-reassessment

 

---------- Post added 01-05-2015 at 19:53 ----------

 

Personal responsibility counts for a lot, when we bought our house in 2004 we had a figure in mind that we wanted to borrow that we had worked out we could afford the repayments on. When we went to get mortgage advice the advisor told us they could get us up to £50000 more. We told him he probably could but we couldn't afford that so we needed to stick to our budget, the look on his face was like we were going to take his favourite toy away.

 

Lots of people didn't make the same decision as us though, they took the money and the pain that came with it. Nobody forced them, they wanted the dream and then they paid and when they couldn't it got taken away from them and thats because of their choices.

 

For every person with aspirations about property ownership beyond their measns there's at least another who took on debt just to stand still. Real wages and job security have been declining for 30 years and credit just helped many people cover the shortfall between income and what was needed to cover living expenses.

[mjw47]

Personal responsibility counts for a lot, when we bought our house in 2004 we had a figure in mind that we wanted to borrow that we had worked out we could afford the repayments on. When we went to get mortgage advice the advisor told us they could get us up to £50000 more. We told him he probably could but we couldn't afford that so we needed to stick to our budget, the look on his face was like we were going to take his favourite toy away.

 

Lots of people didn't make the same decision as us though, they took the money and the pain that came with it. Nobody forced them, they wanted the dream and then they paid and when they couldn't it got taken away from them and thats because of their choices.

 

Yes I agree that we are all responsible for our own actions, but unfortunately some people were seduced by the sales patter and thought it must be OK because who would loan money if they thought it would not get paid back.

 

That change in attitude by the banks is exactly what I was referring to in my first post.

 

There is no way that an offer for more money than you asked for would have been made back in the 70s.

 

Everything was about the bank/building society getting the money back with interest.

 

Any sensible person without the need for financial training could have worked out the end result of loaning money to people who didn't have the wherewithal to pay it back.

 

So how come all the banks and financial institutions full of highly paid 'experts' couldn't see the inevitable happening?

 

Possibly because with the rules relaxed they were making out like bandits with investor and savers money at no risk to them?

[Anna B]

I get the feeling that no matter where the cuts were made Anna you wouldn't be happy..

 

 

Probably not.

 

But I would prefer it to come from the top end where they can better afford it. A mere one off donation of 1% from those with fortunes of over 5 million would pay off the deficit, with money to spare, and they would hardly miss it.

 

Similarly if bankers were to forgo their bonuses or part of their bonuses for 1 year the deficit would be paid.

 

It would be easier to do than chasing them for unpaid tax, but of course it won't happen. Those with money hang on to it tighter than anyone else.

[mjw47]

There may well have been some deregulation of financial services under Thatcher but it was on Brown's watch and after his tinkering that the wheels came off the wagon. It was brown that took away the Bank of Englands authority to regulate banks and the financial services industry. It was on Brown's watch that the build up of toxic debt brought down the house of cards.

 

I remember the time when buying a house required a 25% deposit so that buyers could only borrow 75% of the valueof a property. If things went wrong the bank or building society could sell a property and get their cash back. Not so when they were able to borrow 120% of the value of the house they were buying.

 

The ability to borrow 6 times salary drove up house prices to unrealistic levels and when the crash came it left the lenders and borrowers with property worthfar less than the money owed. That is the toxic loans that brought about the crash, and Brown's complacency that allowed it to happen.

 

 

I never tire of watching this.

 

I have no time for either Thatcher or Brown.

 

Thatchers attitude was summed up by Garret Fitzgerald the Irish Taoiseach who after meeting her on a number of occasions said " She wasn't a PM for Britain, she wasn't even a PM for England, she was a PM for the South East of England ".

 

Thatcher was seduced by The City and how billions could be made without anyone having to get their hands dirty.

 

She was responsible for the start of deregulation.

 

Gordon Brown was unfit for purpose, that link you posted showing what a completely deluded clown he was.

 

In addition to apparently being unaware that boom and bust are natural cyclical events in capitalist societies, he thought it a good idea to sell off our gold reserves at the bottom of the market.

 

 

In order to make it even more of a disaster he did it in two separate lots, meaning that our first sale had lowered the price so we got even less for the second sale.

[psynuk]

So how come all the banks and financial institutions full of highly paid 'experts' couldn't see the inevitable happening?

 

It's widely reported that no-one saw the financial crash coming and that no warnings were given.

That's not actually true the treasury or the Bank of England (iforget which) were actually warned or at least informed by the Bank of Settlements.

 

That would/could lead you to the idea that amongst a certain section of bankers the crash was a known probability but allowed to progress anyway.

 

I wonder if there could be any type of business that would be harmed if a government was in the black.... hmmm

[Radomu]

Britain isn't in that much debt, and if anything the deficit is certainly not the problem. It can be problematic in the long term, but there's absolutely no reason why the government should do austerity in the middle of a recession.

[Mister M]

I dont think he will be next chancellor, a. I suspect that when people actually vote Cameron will get a majority. b. If I am wrong, I dont think Milliband will give him the job. The markets would panic. Run on the pound, disaster.

 

Good job there wasn't a run on the pound when Lamont was chancellor, the markets would panic and it would be a disaster.

[I1L2T3]

Britain isn't in that much debt, and if anything the deficit is certainly not the problem. It can be problematic in the long term, but there's absolutely no reason why the government should do austerity in the middle of a recession.

 

They called it expansionary austerity. It didn't work and it was only after Osborne relaxed than pace of it that the economy began to pick up.

 

Idiocy

 

---------- Post added 02-05-2015 at 10:43 ----------

 

It's widely reported that no-one saw the financial crash coming and that no warnings were given.

That's not actually true the treasury or the Bank of England (iforget which) were actually warned or at least informed by the Bank of Settlements.

 

That would/could lead you to the idea that amongst a certain section of bankers the crash was a known probability but allowed to progress anyway.

 

I wonder if there could be any type of business that would be harmed if a government was in the black.... hmmm

 

The banks knew it was going to happen.

 

Imagine being able to go down the bookies every Saturday and bet thousands of pounds safe in the knowledge that you get to keep all the winning but if you lose somebody else will make good your losses!

 

The banks always knew that governments would step in to sort it all out. It's why the banks behaviour has changed little and next time they know we all have to bail them out again.