Former Prime Minister and Chancellor Of The Exchequer Gordon Brown has claimed the world is ‘sleepwalking into the next financial crisis’ while current Chancellor Philip Hammond says we are still feeling the after-effects of the last.
Mr Brown, who was the Labour Prime Minister forced to deal with the chaos of the financial crisis in 2008, said: “I feel we’re sleepwalking into the next financial crisis.
A future crisis
“This is a leaderless world and I think when the next crisis comes we’ll find that we neither have the fiscal or monetary room for manoeuvre or the willingness to take that action.
“But perhaps most worrying of all, we will not have the international co-operation necessary to get us out of a worldwide crisis.”
Commenting on the 2008 crisis he said he accepted the use of public money to bail the banks out was ‘a bitter pill’ for the British taxpayer to swallow. He also felt ‘frustrated’ that harsher penalties were not imposed on some of the bankers involved.
He said: “I’ll be honest with you. Some of these bankers should have gone to jail and until we have proper laws that can find the guilty and show there are clear penalties, then people will think the bankers have got away with it and will go back to doing the same thing again.
“The penalties for wrong-doing have not been increased sufficiently. The fear that bankers will be imprisoned for bad behaviour is not there. There has not been a strong enough message sent out that government won’t rescue institutions that haven’t put their houses in order.”
He commented that it is likely there will be a different cause to the next crisis, saying: “It is very difficult to say what will trigger it, but we are at the latter end of the economic cycle where people take greater risks. There are problems in emerging markets.
“It could arise in Asia because of the amount of lending through the shadow banking system. In an interconnected world, there is an escalation of risks. We have had a decade of stagnation and we are now about to have a decade of vulnerability.
“There is going to have to be a severe awakening to the escalation of risks, but we are in a leaderless world.”
Current Chancellor Philip Hammond said the ‘shock’ of the 2008 crisis continues to impact the economy and people’s finances.
He said: “People are still suffering from the side effects, but there’s light at the end of the tunnel.
“We suffered a very big shock to our economy in 2008/09, and that’s a shock from which people are still suffering the effects today, but we have got through this in much better shape than many of our neighbours.
“We haven’t suffered catastrophic rises of unemployment, on the contrary, we’ve seen employment grow by three million jobs over this period. Nor did we see widespread repossessions of homes and collapses of businesses in the way we’ve done in previous recessions.
So I think the way this has been managed has minimised the impact.”
“‘Sleepwalking into the next financial crisis’ – Gordan Brown