How did the UK get into the financial mess?


By John Jappy

When Mrs. Thatcher became Conservative Prime Minister in 1979, one of her first acts was to abolish exchange controls.  Using government figures, which were readily available, I found it simple to calculate that £60 billion had left our shores within 6 months, monies which would otherwise have been invested in British industries.  Thatcher went on to start the deregulation of the banks.  With these two acts the seeds of financial ruin were sown.

Sadly when Labour eventually took over, Chancellor of the Exchequer, Gordon Brown, who later  became Prime Minister, had no real conception of financial matters.   Politics got him to his position, not economic or financial ability.  Brown was known to ignore sound advice given him, and lived in awe of the City of London.  

A typical example of this occurred just months before the credit crunch broke.  Prime Minister Brown held a lavish party at 10 Downing Street.  Invited were all the top bankers and financiers in the City.  By Brown’s side was his trusty advisor Sir Fred Goodwin, whom Brown had earlier recommended for a peerage.  As Hansard shows, Brown lost no opportunity to heap praises on his friend, who with his unbridled capitalism led the Royal Bank of Scotland into bankruptcy.   

It was Brown of course who had supervised the final deregulation of the banks, which even the High Priestess of Capitalism herself, Lady Margaret Thatcher, dared not do.  It did not take a lot of vision to see what was going to happen.   

The year before the credit crunch broke, I spent two days working out the amount of debt in the country covering every aspect of borrowing.  I estimated this to have reached £1 trillion, which I described in an article as a “giant financial bubble, ready to burst”.  

When the credit crunch broke, the Treasury estimated the national debt at £1.4 trillion, but then very recently we were told it had just reached £1 trillion, so what are we to believe?  One thing that is certain is that on current borrowing the national debt continues to rise month by month, year by year, a position which is unsustainable.  The extent of Britain’s debt was revealed by the disclosure that out of all the G20 countries, this country’s debt was the largest per capita.  Why have we not by now been plunged into total chaos?  

The answer is that were it not for the Scottish oil revenues currently pouring into the London Treasury, we could now be in a similar position to Greece.  

Perhaps you now understand why David Cameron has said: “I will strain every sinew of my body to keep Scotland within the UK.”