Is Michael Gove abdicating responsibility for education?

The stage is set for the wholesale sell-off of state education.

I get the sense that Michael Gove sees state education as a millstone around his neck. If you are the secretary of state, you are responsible for what happens in our schools. What if you could sell off this millstone? Responsibility will shift dramatically. Business is much easier to blame when things go wrong. You can take the moral high ground. Whatever happens in the schools to the children, it's not your responsibility. You can, in effect, blame everybody else for any educational failure. You remain safe from criticism.

Gove's recent behaviour, washing his hands of any political involvement in the marking down of English grades, or his blaming of "officials" when he reports erroneous figures on playing field sales or the major embarrassment of the Building Schools for the Future cancellation debacle speaks volumes.

But how do you persuade business to take on the thankless task of running what should be a state education system? What are the incentives - philanthropy? No. There has to be something more. First of all business won't like the idea of equal pay for teachers, high pension contributions or having to pay for true professionals. Gove needed to de-professionalise education. This he did in word and deed. It became a "craft" (Gove's word) that anybody can do just by copying others. He scrapped its ruling professional body (The General Teaching Council), immediately downgrading teaching to "just a job", setting it apart from law and medicine who retain their professional bodies. He's on course to demolish national pay agreements anand advocate locally negotiated pay with academy business sponsors and free schools.

Universities have been wrongly and derogatively condemned as hotbeds of "leftist" indoctrination, teaching "useless theories". When challenged, Gove declines to provide any evidence to support this, leaving the accusation hanging. Tory governments have long wanted to excise universities from teacher education. Those countries Gove says he "admires", Sweden, Finland etc seem to disagree. University involvement is key there and crucial in maintaining their highly educated and trained teaching workforce (remember, he scrapped the last government’s intention to make teaching a Masters profession). In a masterstroke, he also removed the requirement for academies and free schools to hire qualified teachers (but made sure the news was buried during the Olympic opening ceremony celebrations). I find it bizarre that he believes that removing university level education can result in a better trained, higher status workforce. The effect is to reduce a once noble profession to "just a job" that anyone can do with a bit of subject knowledge. The greatest expense in any school is the pay awarded to its teachers. Cutting the requirement for those people to hold any professional qualification, especially a higher degree, allows costs to be reduced.

Academies were not this government's idea, but what an idea to appropriate. To encourage Academy sponsorship, grants to sponsors to take on schools are now paid - remember those heady days when sponsors actually had to pay £2million to be allowed the privilege to take on a school? Where schools, parents and local governors disagree with converting to an academy, just sack the governors, put in a new leadership team and press on regardless of parents want - so much for parental choice.

Paradoxically, if parents choose to buy into Gove's ideology, they can set up their own school, a Free School. Millions are diverted into this pet project. It has the desired effect; businesses sit up and look at this new, attractive way of getting a slice of the education pie. Again, if things don't go well and local authorities deny planning permission for buildings, Gove can overrule them - business likes that - decisive no-nonsense planning that can always be in their favour. Where free schools are not wanted or needed by the local community no matter. Even if they only have a handful of pupils, like the Beccles Free School, they will still be supported - a loss leader perhaps in business terms. When it comes to teachers transferring from existing schools to ideologically driven Free Schools, legal protection of employees through TUPE (Transfer of Undertakings - Protection of Employment), is undermined with claims that, as new entities, Free Schools do not have to accept TUPE. This leaves teachers potentially with no employment, no redundancy and problems with claiming employment benefits.

The stage is set for the wholesale sell-off of state education. Declining exam results, with increased targets for schools to meet, will now place hundreds more schools in the situation of being classed as failing; ripe for forced conversion to academy status. For those academies whose results have fallen and who may not meet the target set there is no effective punishment, other than more inspection or some sackings of the workforce (teachers rather than leaders I suspect). Academes may fail, but Gove's answer - academy conversion - is an empty threat when you already are an academy.

Any hint of dissent, any hint of criticism of these policies is simply met with being labelled as a 'Trotskyite, lover of failure'.

But where next? Business exists to profit. Academies cannot make profits - or can they? As Gove shrewdly stated some time ago, academy sponsors are not allowed to make profits from their schools, yet. So profiteering from the children and staff in our schools was never ruled out completely - there may well be plenty of avenues and business opportunities for making good profits for shareholders, if not now, in the (near?) future.

Gove sees privatisation as the saviour of education, but as Jeremy Hunt, Culture Secretary and Philip Hammond, Defence Secretary, have openly stated, the G4S Olympic debacle tells a different story. Private business may not be the saviour of what should be a state provision for all. But press ahead Gove surely will.

What next for the privatisation of our state education system? I predict that profiteering from schools that are part of academy chains will be allowed. Big business will be lined up to take over the new examination system (I see Pearson, for example, schmoozing and posturing in the wings ready to bid whatever it takes to be the sole exam board, if Gove decides to go down that road). In the USA the state of California has awarded a teacher certification contract to a private business (Pearson) for the next 5 years. While I don't want to put ideas into Gove's head, I can see this as an attractive notion for business. Accomplish this and Gove truly will have destroyed any vestige of state responsibility for education in England.

*The writer works in teacher education in England and has chosen to remain anonymous to avoid his institution being labelled as a hotbed of leftist Trotskyites indoctrinating its students with "useless theory".

Michael Gove. Photograph: Getty Images

David Harris is a pseudonym. The writer works in teacher education in England and has chosen to remain anonymous to avoid his institution being labelled as a hotbed of leftist Trotskyites indoctrinating its students with "useless theory".

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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?