It was a massive mistake to begin to make big cuts before recovery was well established, which is what happened in 2010 when the coalition took over.
Up to May 2010 the economy was recovering but this quickly went into reverse as the new government ended the policy of fiscal stimulus. Yet history showed us this was the wrong thing to do.
In the mid-1930s we learned that cutting spending during a recession just makes matters worse. But George Osborne and the Conservatives followed a policy of austerity from 2010 onwards, with the full support of the Liberal Democrats.
Labour’s Ed Balls warned what would happen.
In 2012, he said that there should be a deficit reduction plan, “but only once growth is fully secured and over a markedly longer period than George Osborne is currently planning”.
After the Second World War, the Labour government decided to rebuild the country after the destruction of war in spite of the fact that we were broke due to the borrowing sustained during the war.
In fact it took 60 years to pay off the debts incurred during the war. But that post-war Labour government decided to create our NHS, to rebuild the railways and housing destroyed in the blitz, and to fund the expansion of the welfare state, with measures such as a state pension.
Fortunately Atlee decided to invest in the future and our NHS is just one enduring legacy of that decision today. And the debts were paid off as a result of the economic prosperity that resulted.
So back to today. Osborne’s policy of imposing austerity and budget cuts on the economy was a catastrophic error. It choked off the recovery that had begun but had yet to become fully established.
The austerity panic propelled the economy back into depression; and, far from using public spending as a countervailing force against the cutbacks in private sector investment, the coalition’s budget cuts served to aggravate the crisis.
Osborne and the Tories promised to eliminate the budget deficit during the lifetime of this parliament and have failed miserably on their own measure as the deficit is going up not down.
At the same time, the austerity that the government introduced so dramatically and so disastrously for ordinary people, has brought us the slowest economic recovery on record, and a catastrophic fall in living standards. Remember on average people are £1,600 worse off each year since the coalition came to power.
The coalition has led this country into an austerity trap. We need an economic policy that delivers a rise in living standards for the majority not more of the same. Sadly that is not going to be on offer from George Osborne or his coalition partners.
Meanwhile, UKIP offers even deeper cuts, tax rises for the majority to pay for tax cuts for the wealthy and charges to see your GP.
The reality is that only a Labour government can deliver an economic policy that helps the majority of ordinary people in this country.