Privacy, the public interest and "a woman called Imogen Thomas"

The significance of the <em>CTB v News Group</em> injunction.

The first sentence of yesterday's privacy ruling by Sir David Eady in CTB v News Group Newspapers made it clear which way the rest of the judgment was going to go.

While the others who were to be named in the judgment were accorded the usual judicial courtesy of being introduced as Mr This or Ms That, no such respect was accorded to Ms Imogen Thomas, the second defendant. Instead, she is introduced with the dismissive "a woman called Imogen Thomas".

But worse was to come for Ms Thomas. For, even though there had been no cross-examination of the claimant's evidence, and even though her lawyer stressed that she denied asking the claimant for any money (see paragraph 17), Mr Justice Eady said it "appeared strongly" that Ms Thomas was blackmailing the claimant (paragraph 9).

This was a remarkable observation, not least because it was a suggestion of criminal liability. Not even the claimant's lawyers had made the allegation against her.

Today, rival tabloid newspapers to the newspaper defendant have splashed on this "Blackmail" point with photographs of Ms Thomas. Her reputation appears to have been questioned by our most famous libel judge on the basis of untested -- and denied -- evidence. Even by itself, this is an extraordinary development.

So why was it done? Why did Mr Justice Eady use the absolute privilege of a judicial statement to make such an observation on a defendant in a case before him? Well, partly he did so because he could. The evidence of the claimant seems to have been detailed and compelling, and it appears to have been based in part on text messages. Although Ms Thomas appears to have made a bare denial, she did not submit evidence to controvert the claimant's evidence. On the balance of the evidence placed before him, it was entirely open to Mr Justice Eady to form the view he did for the purpose of the interim injunction until trial.

However, more importantly, such a finding by the court provided part of the public interest in maintaining the injunction. The private lives of the claimant and his family were engaged; and so any interference with this right had to be in the public interest.

It was not enough to assert a right to free expression. In cases such as this, the court has to balance the public interest in freedom of expression against the public interest in the privacy of individuals. Here, the court found that, on the basis of the (untested but not uncontroverted) evidence of Ms Thomas's conduct, and on other evidence, that there was no public interest in publication of details of the claimant's private life. Instead, the public interest was in ordering that the private information should not be published and that the claimant's name not be made public.

This whole exercise is perhaps artificial: the widely-suggested claimant in this action is merely a couple of mouse clicks away. But, as paragraphs 27 and 28 of the judgment makes clear, the fact that some information is supposedly in the public domain does not mean that the parties to whom the court order is addressed can escape. This creates the rather unhappy consequence for the newspaper defendant of carrying the legal costs of fighting the case, while not commercially benefiting from the "kiss and tell story".

This and other cases are steadily making such traditional "kiss and tell stories" more difficult and costly. This is not necessarily a bad thing; if there is no public interest with an interference with someone's private life, then it is hard to justify the press intrusion and public humiliation. Indeed, a respect for personal privacy and an avoidance of humiliation are marks of a civilised society. And, in this case, the newspaper did not even try to argue there was a public interest.

Supporters of privacy law will emphasise that, unlike libel, the "public interest" is built into the DNA of privacy law. There should never be any privacy injunction if the public interest in publication outweighs the need to respect privacy. The lack of a public interest defence that has long marred libel law should thereby not be a problem with privacy law.

That said, the future for privacy law is uncertain. The courts do not want their orders to be futile, and so widespread internet publication of personal details may mean that injunctions are not granted too readily. The tabloid press may convince politicians that there should be new privacy legislation that is not so focused on injunctions (though the "phone-hacking" scandal shows how little the tabloids care for general statutory protections).

There is currently a battle for primacy in Fleet Street over the jurisdiction of the High Court and the freedom of the press to do what it likes with private information. It is not certain who, if anyone, will win this particular battle: not all conflicts have a tidy resolution. But in the meantime, the commercial basis of the traditional "kiss and tell story" will need to be reassessed, and it is difficult to see why that is a bad thing.

 

David Allen Green is legal correspondent of the New Statesman and a media lawyer.

David Allen Green is legal correspondent of the New Statesman and author of the Jack of Kent blog.

His legal journalism has included popularising the Simon Singh libel case and discrediting the Julian Assange myths about his extradition case.  His uncovering of the Nightjack email hack by the Times was described as "masterly analysis" by Lord Justice Leveson.

David is also a solicitor and was successful in the "Twitterjoketrial" appeal at the High Court.

(Nothing on this blog constitutes legal advice.)

Getty
Show Hide image

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?