British jihad: Why our anti-terror strategy isn't working

There is a deep and dangerous confusion at the heart of the government's approach to the threat pose

Towards the end of March two short films were shown in very different circumstances, each in its way issuing a challenge to how we think about violent jihadi Islam, both with serious implications for our approach to combating terrorism in Britain. The first was an item on BBC2's Newsnight of 31 March discussing the work of the former Islamic extremist Hassan Butt, who now claims to be working on the streets of Manchester to "deradicalise" his former comrades-in-arms in the so-called British jihadi network.

Over the years, Butt has become something of a fixture on our screens, often speaking as a member of the radical group al-Muhajiroun, calling for a holy war against Britain and America in Afghanistan. He has now publicly renounced violence and is writing a book with the journalist Shiv Malik, a regular contributor to the New Statesman.

The interview, carried out by Newsnight's Richard Watson, amounted to a series of confessions by Butt of serious crimes. These included helping to recruit hundreds of young men from Britain to fight allied forces in Afghanistan, fundraising for terrorist activities and even, it seems, acts of jihad. At one point, Butt said plainly: "I got involved in terrorism."

The questions is: what do you do with Butt? On the one hand he is a self-avowed terrorist; on the other, he is now apparently doing excellent work with radical young Muslims in Manchester. Butt and Malik have met the Home Office minister Tony McNulty, one of the few government ministers to have taken the trouble to think laterally about terrorism, whom they claim offered to fund the deradicalisation work.

Greater Manchester Police are clearly confused. In a move with serious implications for press freedom, the northern force has decided that rather than arrest Butt, it will attempt to force Malik to turn informant and hand over any material that may be useful in its case against the former jihadi.

Just as ministers were beginning to explore new approaches to radical Islam, Greater Manchester Police obtained a "production order" in court to force Malik to hand over all his research for the book, including an early draft. Malik intends to fight the order and a campaign is building around him with the help of the National Union of Journalists.

The Butt conundrum is a knotty one. Should he be imprisoned for the crimes to which he has admitted, or left on the streets to continue his work of turning young Muslims away from the path of violence? The reaction of Rachel North, a survivor of the 7 July bombings, is interesting. "What is important is stopping people blowing up people," she said, adding that it is probably better to keep Butt out of prison.

The other short film should provide a warning of what happens when all hope of a solution is lost. Fitna was made by the right-wing Dutch parliamentarian Geert Wilders and is a direct attack on Islam's claims to be a religion of peace. Taking its title from the Arabic word for "strife", the crude 15-minute film was released on the website LiveLeak on 27 March. Made in the style of an al-Qaeda propaganda video, the images of violence it uses make for deeply upsetting viewing. Passages from the Quran, apparently emphasising the importance of martyrdom and urging violence against Jews, are intercut with atrocities such as the attack on the twin towers, and the bombings of Atocha station in Madrid and the London Underground. These are juxtaposed with the words of radical preachers and indoctrinated children spouting anti-Semitic propaganda, as well as images of Islamic militants making the Nazi salute.

Alternative vision

The film, as the title suggests, is intentionally provocative. Wilders argues that liberal western culture must make a stand against an ideology every bit as pernicious as fascism and communism. But any political programme that flows from the fear of mass immigration and the "Islamisation" of Europe is every bit as authoritarian as the movements Wilders is attempting to expose. He has already received the obligatory death threats, with crowds in Jakarta, Indonesia calling for his execution. Meanwhile, the United Nations secretary general, Ban Ki-moon, has issued a statement condemning the film.

Fitna is a vision of supreme reactionary pessimism, suggesting that Europe is already engaged in an internal civil war with Islam. But unfortunately, no European government, of the left or right, has yet been able to provide a coherent alternative vision. The contradictory approach of the British authorities to the work of Butt and Malik is evidence of a deep confusion at the heart of this government's terror strategy. The pursuit of a journalist whose work has been praised by ministers and the head of MI5, Jonathan Evans, is an act of desperation.

Sometimes it is difficult to see where the government gets its inspiration from. But as far as its latest anti-terror legislation is concerned, it seems ministers must have been watching reruns of Dad's Army and taking their lead from Corporal Jones. This is "don't panic, Mr Wainwaring" policymaking. The measures in the new Counter-Terrorism Bill do little to reassure, or perhaps the hope is that, like the Home Guard in the Second World War, we will muddle through in the end.

But this is no sitcom. Getting the policy wrong has deadly consequences, as we saw most clearly on 7 July 2005, when few had foreseen the growing threat from home-grown terrorism. The 42-day precharge detention period for terrorism suspects is a classic case of policy made on the hoof. The number of days was snatched from the air in an attempt to prove that the government was tougher than the Tories on terror and Labour spin doctors are still convinced this is playing well with the public despite polling evidence to the contrary.

Even backbenchers who supported Tony Blair's 2005 proposals to extend the period of imprisonment without trial to 90 days have their doubts about the present bill. Andrew Mackinlay, MP for Thurrock, said: "I was a 90 days man, but a lot of water's gone under the bridge since then. Basically it's a question of trust. Any dates are arbitrary. What is so magical about 42 days?"

Andrew Dismore, chair of the joint committee on human rights, who is usually viewed as a hardliner on terrorism, told the NS that he has changed his mind because he now believes there are better alternatives on the table. The new offence of "acts preparatory to terrorism" has helped persuade Dismore that it is now easier to charge terrorist suspects, as has the introduction of "threshold charging", which allows the police to bring a prosecution on the "realistic suspicion" of terrorist activity, rather than the usual need for the reasonable prospect of conviction.

It is deeply embarrassing for the government that the Director of Public Prosecutions Ken Macdonald, the former attorney general Lord Goldsmith and the former lord chancellor Charlie Falconer have all spoken out against the 42 days.

According to Dismore: "We now have the experience of the 28-day limit and that has proved adequate, to both the DPP and the Crown Prosecution Service. I don't believe the government has made the case for extension based on the level of terrorist threat, and the impact on minority communities and the safeguards in place, if 42 days were brought in, would be woefully inadequate."

A recent open letter opposing the 42-day extension was signed by everyone from Lord Ahmed to the fashion designer Vivienne Westwood and the actor Colin Firth (you know you are in trouble when Mr Darcy is on the other side of the argument). But how did the government get itself into this mess and who is to blame? A poll of insiders from across the political spectrum, carried out for the new website PoliticsHome. com on 1 April, showed that nearly 60 per cent felt the root of Labour's difficulties on this issue lay with the Prime Minister, not with the Home Secretary Jacqui Smith or opposition from Conservative or Labour MPs. Ultimately, Gordon Brown has to take responsibility and show that there is a driving philosophy behind the government's anti-terror strategy. The alternatives, such as those offered by Fitna or the Greater Manchester Police, are too awful to contemplate.

This article first appeared in the 07 April 2008 issue of the New Statesman, British jihad

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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?