Is Sky News biased against Labour?

No, is the short answer. Balls and Prescott are wrong.

During my period as a producer at Sky News, between 2005 and 2007, I used to answer the question, "Where do you work?" from members of my wife's family in the United States with the line: "A channel called Sky News. It's the British equivalent of Fox News."

What I meant, of course, was that Sky News is, like Fox News, a 24-hour rolling news channel, available on satellite and via cable, and part of Rupert Murdoch's global media empire. But in style and in substance, of course, it is nothing like the pro-war, pro-Republican, pro-Palin Fox News Channel (FNC).

For a start, we have Ofcom (which the Tories want to abolish!) and Ofcom would never allow such blatant, on-air bias in this country (God bless Ofcom!). Indeed, I defy you to find me a single anchor or reporter on Sky News who bears even a passing ideological resemblance to Bill O'Reilly, Glenn Beck or Sean Hannity.

But the Labour Party and some of its more credulous supporters seem to be insinuating -- or, in the case of Ed Balls and John Prescott, explicitly claiming -- that Sky News has a pro-Tory, anti-Labour bias.

Here's what the Children's Secretary said to me in his constituency on Saturday:

I travel to Yorkshire on the day the Guardian has endorsed the Liberal Democrats and the Times the Conservatives. Are the media united against a Labour victory? "The BBC has fought valiantly to be fair and balanced, but Sky News and most of the newspapers are deeply partisan." He criticises the Murdoch-owned broadcaster and the right-wing press again later in the interview. "This election is much more open than the newspapers and Sky News suggest. The polls are very tight."

And here is John Prescott, on the Guardian's Comment is Free, in the immediate wake of "Bigotgate":

Yet again, the dying Murdoch empire is doing all it can to influence a British election . . . But today, the Murdoch family reached a new low in their desperate attempt to turn the election for the Tories. News International's Sky News broadcast a private conversation between Gordon and his staff . . . What Murdoch's Sky News did today was just as bad as his paper's phone-hacking. It was a breach of privacy. It was underhand. And it was done in the pursuit of ratings and political influence.

This is absurd. Yes, Sky News broadcast the conversation in "pursuit of ratings". That's a given. And, I should add, you could argue that there was also a genuine public interest defence. Also, does anyone honestly believe ITV News wouldn't have done the same?

But to accuse Sky News of pursuing "political influence" is a desperate claim. There is no evidence whatsoever to suggest there is a co-ordinated anti-Labour, pro-Conservative campaign on the part of Sky News. John Ryley, the Sky News boss, Chris Birkett, his executive editor, and Jonathan Levy, the head of the broadcaster's political unit in Millbank -- all of whom I consider friends of mine -- are not Tories, and, if they are, they've done a damn fine job of hiding it from me and countless others.

Adam Boulton, meanwhile, is the semi-sympathetic biographer of Tony Blair -- and married to Blair's former "gatekeeper", Anji Hunter. Oh, and to those of you who have never worked in a TV newsroom, let me be very clear: Rupert Murdoch doesn't ring up each evening to discuss and decide the running orders with Messrs Ryley and Birkett. In fact, in my two years at Sky News HQ in Isleworth, Middlesex, Murdoch Sr physically turned up just once -- and, that too, to open a new building, not to pontificate on day-to-day editorial matters.

Labour critics of Sky News might point to last night's events at Methodist Central Hall, where Gordon Brown gave perhaps the best speech of the campaign so far, while Sky News chose to cover the lone anti-nuclear protester, rather than the speech itself and the impressive performance from the PM. It was a bad decision -- but again, in my view, this reflects Sky's sensationalist and perhaps understandable desire for ratings, upsets, gaffes and "incidents", rather than an explicit, pre-planned, anti-Brown agenda.

Left-wing conspiracy theorists can sleep in peace. The Sun is fighting a partisan, pro-Cameron, ant-Brown campaign. So, too, is the Times, with its propagandistic picture of Sam Cam lying in Dave's arms on its front page today. But Sky News remains, as far as I can see, free of party political bias.

All you could accuse it of -- maybe! -- is being part of a wider British press pack that has gullibly, lazily and perhaps subconsciously bought David Cameron's guff about change, momentum and inevitablility. If that's the case, the the BBC is equally guilty. But I repeat: Sky News is not the Sun. To compare the two is just silly.

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

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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?