Jesse Norman is Conservative candidate for Hereford and South Herefordshire, which he has represented since 2010. He is also Financial Secretary to the Treasury,

This is a time in which public debate is disfigured by noise, abuse, accusation and retort. All the more so in a General Election.

But just occasionally you get a moment of real clarity: a time when you can say “Yes, I get it – I see what happened. I understand.”

Take the financial crisis of 2008, for example. It was a cataclysm, no doubt about that, and the debt it created still burdens our public finances. Little wonder that argument has raged as to what happened and who was responsible.

Was it Gordon Brown’s failure as Chancellor, or the hangover of the Thatcher deregulation of the 1980s? An out-of-control bonus culture, bad management at the banks, failures of regulation and supervision, the rise of collateralised debt obligations and other financial derivatives? All these factors have been blamed.

So what’s the truth? Reader, in reality this is one of those rare moments where real clarity is possible. You only need to know one fact to grasp, at the deepest level, what went wrong.

Take a look at the graph below. It comes from the Vickers Banking Commission of 2011, with data from the Bank of England. Long forgotten, it nevertheless tells a remarkable tale.

The “leverage ratio” is the relationship between how much a bank borrows and how much shareholder capital it has. Three things immediately stand out:

1. The average ratio for the UK banking sector between 1960 and 2000 was 20x, i.e. as a whole UK banks borrowed twenty times their capital.

2. That ratio of 20x capital was remarkably consistent. It broadly stayed the same over 40 years, including the go-go 1960s, the stagnant 1970s, the energetic 1980s, the NICE or non-inflationary continuously-expanding 1990s.

Don’t forget that in other respects those decades were anything but stable. Among other things, there was a secondary banking crisis, the near-collapse of Barings, Black Wednesday and the UK’s exit from the Exchange Rate Mechanism, a host of foreign sovereign debt crises, and several recessions. But despite all this, UK bank borrowings remained pretty constant, at 20 times capital.

3. However, around the year 2000 something absolutely fundamental happened. After that date UK bank borrowings started rising, and rising fast. In 2004 they exceeded their 40-year peak at 26x capital. By 2006 they were over 30x, and accelerating fast.

In 2008-9 UK bank borrowing peaked at over 50x capital. At that moment, the UK banking sector as a whole had £100 of debt for every £2 of shareholder capital. Some banks had less, some considerably more.

Thus when disaster struck in 2008, it hit a banking sector that was more than two and a half times as leveraged as it had been over nearly 50 years. The effect of this was catastrophic, as the sheer burden of debt pushed the whole sector into meltdown.

The conclusion is inescapable. Indeed, rarely if ever can a historical picture be so clear.

Many specific factors played a part in the banking crisis of 2008. But at root that crisis was the result of gross overleveraging – indeed an orgy of borrowing – by the banks, permitted by a lax regulatory and supervisory regime.

That regime was created by the Labour Party. It was Gordon Brown as Chancellor who decided in 1997 to transfer bank regulation from the Bank of England to the Financial Services Authority, and it was Brown who set the regulatory framework through the Financial Services and Markets Act 2000.

That was the last time Labour was in government. Yet compared to the present Shadow Chancellor, Brown seems a paragon of prudence. Voters, beware.