Another misleading debate here is about 'the boom years'. The period where the right wingers attack Labour for running deficits is 2002-2008 (the budget was in surplus before that) where they say surpluses should have been run because we had an 'economic boom'. Long run trend growth in the UK in the 30 years leading up to the financial crisis was around 2.8%, so really a 'boom' is when you have growth significantly above that and a 'bust' is when you have growth significantly below that (especially when growth is negative).

All the GDP figures are available on the ONS website here: www.ons.gov.uk/ons/datasets-and- ... able-id=A2

This is data series ABMI, the measure reported for GDP. The series there just gives the absolute numbers so you can calculate the growth rate from one year to the next by dividing the second year by the first, subtracting 1 and multiplying by 100 to get a percentage.

First if you look at the 30 year period leading up to the crisis, ie 1977 to 2007, the ABMI in 1977 was 646297 and in 2007 was 1474153. So [[(1474153/646297)^(1/30)-1*100 gives you the 30 year trend growth rate, which is 2.786%.

Now you can compare the annual GDP growth rates from 1992-97 with the period from 2002-07. I have put the annual GDP growth rate in blue and the budget balance (negative indicates deficit) in red

1991/92 =#0000FF0.8% =#FF0000-2.9%
1992/93 =#0000FF3.2% =#FF4000-6.4%
1993/94 =#0000FF4.5% =#FF0000-7.7%
1994/95 =#0000FF3.2% =#FF0000-6.5%
1995/96 =#0000FF3.1% =#FF0000-5.2%
1996/97 =#0000FF3.9% =#FF4000-3.7%

2001/02 =#0000FF2.4% =#FF0000+0.7%
2002/03 =#0000FF3.8% =#FF0000-1.8%
2003/04 =#0000FF2.9% =#FF0000-1.3%
2004/05 =#0040FF2.8% =#FF0000-3.1%
2005/06 =#0000FF2.6% =#FF0000-3.3%
2006/07 =#0000FF3.6% =#FF0000-2.4%

The growth rates in the 1990s were higher than in the 2000s, and the deficits being run by the Conservative government in the 1990s were much higher than those being run by Labour in the 2000s leading up to the financial crisis. But compared to the long run trend growth rate of 2.8%, what went on in the 2000s was not a boom, it had two years significantly above trend growth (2003 and 2007), whereas in the 1990s, growth was above 3% most of the time and the year of 1994 with very strong growth included a very large deficit!

As I explained in my last post the real reason for this was the much higher rate of unemployment in the 1990s which meant there was a large benefit bill draining the public finances, which wasn't the case in the 2000s. That's why the Tories don't ask the question "why did we run such large deficits in the boom years" in the 1990s, because they know the answer was due to unemployment.

I don't want to make this post too long so won't analyse the rest of the data but what we had in the years leading up to the recession was not a 'boom', we had had many years of around trend growth without a blip, which is a different thing. We had not had a recession since 1990/91. The 'boom and bust' that Gordon Brown referred to of the Tory years was a bust from 1980 to 1982, followed by a very strong boom from 1986 to 1990, followed by a bust from 1990 to 1992, followed by a boom from 1993 to 1996.

Where you had a 'boom' in the Labour years (well really going back to 1995, but most of that was Labour) was a boom in property prices. This meant individuals felt wealthier. Also there was a boom in lending, which was partly underpinned by and partly continued the growth of those property prices. This boom in lending was not underpinned by similar levels of economic growth, so the result was a large accumulation of private debt.

As a final point, just to illustrate the depth of the financial crash, the growth figures and deficits in the last few years were:
2007/08 =#0040FF-0.9% =#FF0000-2.5%
2008/09 =#0000FF-4.0% =#FF0000-4.9%
2009/10 =#0000FF1.8% =#FF4000-10.9%
2010/11 =#0040FF0.8% =#FF0000-9.9%

Had we continued on the path of trend growth of 2.8% from 2007, we would have had GDP 14.4% higher than it was at the end of 2007, so the depth of the recession and lack of pace of the recovery has lost an enormous amount of potential output.

Another misleading debate here is about 'the boom years'. The period where the right wingers attack Labour for running deficits is 2002-2008 (the budget was in surplus before that) where they say surpluses should have been run because we had an 'economic boom'. Long run trend growth in the UK in the 30 years leading up to the financial crisis was around 2.8%, so really a 'boom' is when you have growth significantly above that and a 'bust' is when you have growth significantly below that (especially when growth is negative).

All the GDP figures are available on the ONS website here: www.ons.gov.uk/ons/datasets-and- ... able-id=A2

This is data series ABMI, the measure reported for GDP. The series there just gives the absolute numbers so you can calculate the growth rate from one year to the next by dividing the second year by the first, subtracting 1 and multiplying by 100 to get a percentage.

First if you look at the 30 year period leading up to the crisis, ie 1977 to 2007, the ABMI in 1977 was 646297 and in 2007 was 1474153. So [[(1474153/646297)^(1/30)-1*100 gives you the 30 year trend growth rate, which is 2.786%.

Now you can compare the annual GDP growth rates from 1992-97 with the period from 2002-07. I have put the annual GDP growth rate in blue and the budget balance (negative indicates deficit) in red

1991/92 =#0000FF0.8% =#FF0000-2.9%
1992/93 =#0000FF3.2% =#FF4000-6.4%
1993/94 =#0000FF4.5% =#FF0000-7.7%
1994/95 =#0000FF3.2% =#FF0000-6.5%
1995/96 =#0000FF3.1% =#FF0000-5.2%
1996/97 =#0000FF3.9% =#FF4000-3.7%

2001/02 =#0000FF2.4% =#FF0000+0.7%
2002/03 =#0000FF3.8% =#FF0000-1.8%
2003/04 =#0000FF2.9% =#FF0000-1.3%
2004/05 =#0040FF2.8% =#FF0000-3.1%
2005/06 =#0000FF2.6% =#FF0000-3.3%
2006/07 =#0000FF3.6% =#FF0000-2.4%

The growth rates in the 1990s were higher than in the 2000s, and the deficits being run by the Conservative government in the 1990s were much higher than those being run by Labour in the 2000s leading up to the financial crisis. But compared to the long run trend growth rate of 2.8%, what went on in the 2000s was not a boom, it had two years significantly above trend growth (2003 and 2007), whereas in the 1990s, growth was above 3% most of the time and the year of 1994 with very strong growth included a very large deficit!

As I explained in my last post the real reason for this was the much higher rate of unemployment in the 1990s which meant there was a large benefit bill draining the public finances, which wasn't the case in the 2000s. That's why the Tories don't ask the question "why did we run such large deficits in the boom years" in the 1990s, because they know the answer was due to unemployment.

I don't want to make this post too long so won't analyse the rest of the data but what we had in the years leading up to the recession was not a 'boom', we had had many years of around trend growth without a blip, which is a different thing. We had not had a recession since 1990/91. The 'boom and bust' that Gordon Brown referred to of the Tory years was a bust from 1980 to 1982, followed by a very strong boom from 1986 to 1990, followed by a bust from 1990 to 1992, followed by a boom from 1993 to 1996.

Where you had a 'boom' in the Labour years (well really going back to 1995, but most of that was Labour) was a boom in property prices. This meant individuals felt wealthier. Also there was a boom in lending, which was partly underpinned by and partly continued the growth of those property prices. This boom in lending was not underpinned by similar levels of economic growth, so the result was a large accumulation of private debt.

As a final point, just to illustrate the depth of the financial crash, the growth figures and deficits in the last few years were:
2007/08 =#0040FF-0.9% =#FF0000-2.5%
2008/09 =#0000FF-4.0% =#FF0000-4.9%
2009/10 =#0000FF1.8% =#FF4000-10.9%
2010/11 =#0040FF0.8% =#FF0000-9.9%

Had we continued on the path of trend growth of 2.8% from 2007, we would have had GDP 14.4% higher than it was at the end of 2007, so the depth of the recession and lack of pace of the recovery has lost an enormous amount of potential output.