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Collaboration is the key to coalfields regeneration

When the last shift ended at Kellingley Colliery, North Yorkshire, in December 2015, it marked the end of deep coal mining in Britain. Since the early 1980s, over 250,000 jobs were lost in the industry and whilst regeneration efforts over the last 30 years have reclaimed sites, creating new housing and the infrastructure for new businesses and jobs, the scale of these losses was huge, and deep-seated social and economic problems remain.

The Coalfields Regeneration Trust was established in 1999. When we launched our first grant programme we were overwhelmed by the demand, however, this was simply a reflection of the need out there in the coalfields. Our name resonated with people who were incredibly proud of their communities and the contribution made by the coal industry to Britain’s prosperity.

Our independence meant we could be more flexible and responsive, and this helped us direct resources into communities where other funders struggled. Over the last 17 years our programmes have evolved and we have achieved some fantastic results for the 2,000,000 people who have benefited from our support. We have also gained a better understanding of the underlying issues that still impact on the quality of life in the coalfields. There are 5,500,000 million people living in Britain’s former mining communities and many do not enjoy the opportunities afforded in non-coalfield communities. While this inequity exists, we still have a job to do.

The key challenges

The greatest challenge is the fact that there are only 50 jobs per 100 working age people in the coalfields. when you compare this figure to London (79), and the South-East (68), it doesn’t take much to recognise that there is a major problem here. The key factor is the number of businesses; the coalfields have significantly fewer businesses than non-coalfield communities. Unless this fundamental problem is addressed at scale, we will continue to see high levels of unemployment in our communities.

We also need to raise skill levels, or at least align skills to the local labour market. There are significant numbers of people who don’t have a qualification or are low skilled and this is a major barrier to competing for jobs. If new jobs are created we want our communities to be able to access them. For many people, it means an introduction to learning again and to do this they need to be engaged. It takes time to develop these relationships and build this confidence in people and the resources to make this happen are often lacking.

We also have a real issue with health in our communities. We have significant numbers of people experiencing long-term health problems that limit their day-to-day lives. It’s a major barrier for some people in accessing a training course or attending a job club but there are often low-cost solutions, such as ‘social prescribing’, that can make a real difference to the health of a person.

What the Trust can offer the coalfields

Right now we’re delivering an ambitious range of activities across England, Scotland and Wales. Everything from safeguarding community assets, developing community plans, engaging people through sport, helping people into work, supporting community organisations and creating new industrial space. I can’t remember a more exciting time in terms of how we want to work with our communities and we’ve got some fantastic partnerships with the private, public and voluntary sectors in the mix to help us. All our future activities will be geared to address our strategic themes of employment, skills and health and we will continue to collaborate to leverage additional resources into the coalfields.

We know we could do more and welcome the continued support of the Scottish and Welsh governments. We do, however, have a new and compelling proposition. Our aim is to create a £40 million investment fund for the coalfields, and we are inviting the English government to become a partner with us and contribute £30 million to match our commitment of £10 million. This will enable us to build 400,000 square feet of new industrial and commercial space, creating 1,000 jobs. Over 25 years this will generate £50 million in income, which we will invest in social impact projects generating £500 million in wellbeing value. We see this as a real legacy project for a generation to come.

We know this might seem an ambitious proposition in the current climate, but it’s a truly enterprising approach. Collaboration is at the heart of this and is the essential ingredient for all our future work. Without it we will not achieve the results we want for our communities.

About The Coalfields Regeneration Trust

The Coalfields Regeneration Trust is dedicated to supporting and improving the quality of life for the 5.5 million people living in the former mining communities of Britain. We have worked at the heart of many of these communities since 1999 and have a track record of delivering targeted programmes that have reached over two million people helping many thousands; back into work; to develop new skills and participate in activities that have improved their health.

There is compelling evidence that recognises the significant challenges that still remain and shows how coalfield communities lag behind national averages on multiple indices of deprivation. Our enterprising and innovative responses will address these challenges but we need the support of government and regional stakeholders to help us achieve the scale of impact required.

Employment
The employment rate in the largest UK coalfields is consistently lower than the rest of the country. On average, 14 per cent of adults in the coalfields are out of work on benefits, which is 40 per cent higher than the national average and double that of south-east England. The Coalfields Regeneration Trust has helped more than 25,500 people into work and created or safeguarded more than 5,500 jobs.

Skills

The proportion of the working-age population with low or no qualifications in the English coalfields is roughly 60 per cent higher than in London and 40 per cent higher than in south-east England. Thanks to the programmes The Coalfields Regeneration Trust has
supported, 1.3m people are now more highly skilled.

Health

A worrying 11.7 per cent of people living in the coalfields report long-term health problems, compared to 8.6 per cent nationally. Incapacity benefit is claimed by 8.4 per cent of adults of working age in the coalfields, which is 35 per cent higher than the national average and almost double south-east England. The Coalfields Regeneration Trust has invested in projects that have improved the health of over 250,000 people

The proportion of
the working-age
population with low or
no qualifications in the
English coalfields is roughly 60 per
Employment
The employment rate
in the largest UK
coalfields is consistently
lower than the rest of
the country.
On average, 14 per cent of adults
in the coalfields are out of work on
benefits, which is 40 per cent higher
than the national average and double
that of south-east England.
The Coalfields Regeneration Trust has
helped more than 25,500 people into
work and created or safeguarded more
than 5,500 jobs.

For more information, visit www.coalfields-regen.org.uk

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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?