Eurozone soap opera reveals a damaged relationship with markets

Democracies need to get some self-respect.

We’re all familiar with the story. Girl meets glamorous guy with flashy car and nice teeth who promises her the world. He screws around, and when she gets angry, he threatens to leave. But by now our girl is so dependent on the guy she’s desperate for him to stay. Sobbing, she throws herself at his feet and promises she’ll do better.

This soap opera can help us understand what’s playing out in the eurozone.

States fell in love with markets, and they let us down. Financial deals we depended on turned out to be phonies. When we talk about introducing extra regulation to prevent this happening again, financial institutions threaten to leave our borders and seek pleasure elsewhere.

Like the girl, democracies are now the ones offering to change. At the centre of the emerging eurozone plan is a call for fiscal integration, whereby states promise to abide by strict spending limits in return for bailout funds. But the underlying causes of under-regulation and overconcentration of market power remain unsolved. Our relationship with the City still suffers from an imbalance of power and we’re still at risk.

We need to be more honest about what triggered the current European crisis. Apart from Greece, the problem was not unsustainable levels of public spending. It was banks handing out risky loans and stockpiling bad debts. Spain is a classic example. The country ran a balanced budget until 2008, when it was forced to pile horrific property debts onto the public balance sheet to bail out irresponsible lenders. As this fantastic BBC graph shows  (see total debt graph), this is a common pattern for most countries.

I don’t want to abdicate responsibility. We all took on those loans from the banks when we shouldn’t. We all enjoyed that party in a bubble and lived a false dream when we should have kept a tighter eye on reality. Britain should have been in surplus from 2004-2008. The girl in our story should have been brave enough to see the writing on the wall. We should have taken action earlier.

But we are where we are. All we can do is change our behaviour now. It’s understandable that Merkel wants fiscal rules on states to make sure they don’t blow German money. But without addressing the banks too, you’re setting up a terrible incentive problem. Everyone knows if the girl gets back with the guy without punishing him for cheating, he’s going to do it again. In fact now he knows he can get away with it, he’s more likely to.

Sadly in the middle of the crisis, no country feels strong enough to limit financial services, whether it improves stability or not. In a desperate attempt to grow, governments are happy for banks to throw money at anything. Any bubble is better than stagnation. We don’t have the self-esteem or self-confidence to challenge our irresponsible partner and build a better relationship.

Although there is some talk of banking union, this is more about sharing bad debts than introducing stronger lending conditions. Although some like former F&C chairman Robert Jenkins says this may change, at the moment the assumption that “liquidity is free and will and will be freely available” continues to hold.

Britain is one of the greatest sufferers of self-delusion. Osborne is massively opposed to the transaction tax – the one small move Europe might be prepared to take to challenge the City – and he used his recent Mansion House speech to announce that the state will be underwriting risky loans. He’s pulled back on the already watered down proposals of the Vickers Commission, reducing the required amount of back up deposits to three per cent when columnists like Martin Wolf at the FT are calling for ten per cent.

You don’t have to be an agony aunt to figure out what comes next. Without a change in this poisonous relationship, we’re setting ourselves up for another fall. Our girl needs to rediscover her self-respect. Get it wrong, and it will hurt. But get it right, and democracies and markets have a chance to build a new, more honest and productive future together.

Democracies and markets could still find a more stable future together. Photograph: Getty Images

Rowenna Davis is Labour PPC for Southampton Itchen and a councillor for Peckham

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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 workingage 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