Thursday, 30 June 2011


There has been a status going around on facebook and Twitter asking: "Remember when police officers, teachers, nurses, binmen etc crashed the stock market, wiped out banks, took billions in bonuses and paid no tax? No, me neither."

That's not an exact quote by the way but Johann Hari told me it was okay to paraphrase.

Obviously this ties in with the unions line that the public sector is not to blame for the current financial situation and therefore should be allowed to pretend it doesn't exist. Nevermind solidarity with workers in the private sector who have a far worse deal than the new one put before public sector workers. Or that no recession in history has only been paid for by those perceived to have caused it. The public sector didn't cause the crisis so they should be untouched.

So who is responsible? Let's find them and make them pay!

Ah yes, the bankers. A difficult group to defend seeing as they are a pretty odious bunch. Gambling all that money. Leveraging far too many times their equity for greater and greater profits.

What on earth inspired them to be so reckless? Greed, clearly. The wish for more and more seems to be a required qualification for investment banking. That is the public perception of bankers and who would dispute it?

If bankers are so inherently rapacious why weren't they behaving in this way before?

The simple answer is that they weren't allowed to.

When Labour came to power in 1997 Blair and Brown were faced with a dilemma. They represented a 'New' Labour Party that was not going to raise taxes and was business friendly. No more socialism for them.

Their new way was to have as many people as possible employed by the state and give them wages that were better than the private sector and still have great benefits. Whatever their reasons for this (bribing the electorate, inherent love of a large state or improving standards of living depending on your point of view) it needed to be paid for.

Mr Blair was the smiling face of this new business friendly Labour Party and he found a way of getting business to pay for it. Not by taxing them more of course, that would never do. How else then? By deregulating banks and allowing them to take bigger risks and make bigger profits. This way the Exchequer would receive larger sums of tax revenue without putting taxes up, bankers would make a fortune and public sector jobs would suddenly become very desirable.

It worked brilliantly. All the gambles paid off or were covered up with no effective regulation to uncover the losses. People got used to the idea that it was affordable to have a public sector where people retired early and received the same wages as an equivalent private sector worker who retired later.

Then, as with all gamblers, the banks eventually lost. With this there was suddenly no way of paying for such an expensive public sector.

Seeing as these risks were taken to pay for public sector salaries and pensions perhaps people facebook status should read: remember when the demands of the public sector caused the banking crisis?