Some are saying that you can’t hold Brown in anyway responsible for the current situation because no one saw it coming. But as Martin Bright points out in the New Statesman this week, this simply isn’t true:
“Brown’s assiduous biographer, Simon Lee of Hull University, noticed the warning signals contained in the report. He wrote last year, in his book Best for Britain?: the Politics and Legacy of Gordon Brown, “as the IMF has noted, by encouraging the UK economy to become even more linked to global financial markets, the British model has increased the vulnerability of the UK economy to global risks and contagion”.
The report warned of the UK’s high levels of household debt, not something the Prime Minister can blame on global markets, and it noted the UK housing market was overpriced and could be heading for a crash. More crucially, it contained a warning of “the gap between customer lending and customer funding through deposits” leading to a reliance on the wholesale markets – precisely what brought down Northern Rock.
When the business journalists reported the IMF’s findings on 5 March last year they concentrated on the headline statement that Britain’s economic performance remained “impressive”. But that was a historical judgement. A far more significant part of the report concluded: “Given these growing cross-country linkages, global risks are particularly important to the UK financial system, more for their potential severity than for their likelihood of being realised.”
In other words, it probably won’t happen, but if it does, the British financial system will be hit very hard indeed.
Well, it did happen. And the IMF’s early warning system had sounded the alarm. In bilateral discussions, the UK was warned in March 2007 that our system was particularly vulnerable to shocks in the international markets precisely because of Britain’s unique links to those markets. The government simply chose not to listen.”
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