Financial crash took us to the brink – where are we 10 years later?

By |2018-08-23T15:15:18+00:00August 23rd, 2018|Health, LRG, News, News, news,updates, podcast|0 Comments

September marks the 10-year anniversary of the financial crisis when the ‘credit crunch’ of 2007 became the ‘global crisis’ of 2008.  

In what was dubbed “probably a once in a century type of event”, as an undergraduate, the build up to the to the crash was a fascinating watch, with no experience in the real-world I remember watching on from afar and assumed the storm would blow over and the dust would have settled by the time I graduated.  Looking back, I think how could I be so naive! 

After all, the European Central Bank pumped in over £200billion to improve banking liquidity, the £1billion withdrawn in a single day from Northern Rock customers was the largest run on a British Bank in more than a century eventually resulting in its nationalisation, interest rates were slashed, RBS wrote off £5.9b of debts and prior to the contagion the International Monetary Fund (IMF) was forecasting $1trillion of losses as a result of the credit crunch. 

And then…on the 10th September 2008, Lehman Brothers (the symbol of the economic crash for many) posted losses of $3.9b within the space of 3 months.  Five days later, Lehman’s collapsed and so began billions of pounds of taxpayer financial bail-outs, resulting in the worst recession in 80 years and massive monetary and fiscal stimulus packages.  

The National Audit Office report found that the UK government at the peak of the financial crisis is estimated to have invested £955billion in a single year (the equivalent of 6 ½ NHS budgets) and that the final cost would not be known for years to come.  A fascinating timeline of events can be found here. 

Ten years on, I now believe we are seeing the true cost of the financial crash and the consequences of both the financial system and others gambling and forgetting the need for prudent and sound management of finances to weather difficult times. 

If we take Central Government as an example who continue to maintain critical services, even with significant cut backs, the UK government is still occurring on an annual basis £50b of debt. Whilst it grabbles with the deficit, its not even tackling its gross debt which stood at £1,763.8 billion at the end of the financial year ending March 2018 and the equivalent to 85.8% of gross domestic product (GDP).  

 

If we look at Local Regional Government which is constantly asking for more money from Central Government to help themselves out with their own financial predicaments, it’s no wonder the government is saying it’s not got any spare change for them. Therefore, it is probably right that cash-strapped councils should continue with their plans to strip back their services to the “legal minimum” and it could be argued it could have been doing that much sooner. 

 

Pressures on our fragile economy will continue to grow and the repercussions of the financial crash in 08 are only going to heighten and are really starting to become more apparent by the day with one in three children born in the UK today now expected to live to 100. By 2046, 1 in 4 people will be 65 years old or over meaning pressures of an aging society will only continue to increase on the Health and Social Care bills. 

 

Technology is helping solve some of these challenges and is helping make significant changes to the way in which services are delivered to the public, for example it is estimated that Councils could make as much as £14.7bn in savings through greater digitisation of services annually.  The digital transformation of manufacturing and supply chains using technologies such as machine learning and AI has helped achieve efficiency gains of up to 10%, imagine if we were able to transform those efficiency gains to the public sector as well as the private sector.  

The upheaval since the financial crash has been difficult for many and while we can be proud of what we have achieved in the last 10 years we must continue to tackle the knock-on effects of the 2008 crash and use digital transformation to overcome our challenges of today and the challenges which will inevitably arise in the years ahead.  

Take a listen to the accompanying podcast

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