Why Buckingham must re-elect John Bercow

The case for the reforming Speaker, and the case against another disgraceful move to oust him.

Some very strange things are happening in Buckingham.

The sitting MP is John Bercow. He is also Speaker of the House of Commons. There is a perfectly just tradition that the Speaker is not challenged, and even though a few right-wing Tory backwoodsmen have been plotting undemocratically in Westminster to remove him, they are estranged from their leader. Indeed, David Cameron has said:

John Bercow is a hard-working constituency MP, who continues to take up cases and support local issues. So in this election I would certainly urge all Conservatives -- and, indeed, supporters of all parties and of none -- to vote for the Speaker, John Bercow.

I wrote about the isolated Tory plot and about Bercow's reforms to parliament here. And although I recommend that you read it all, I will just post here the conclusion:

Those agitating for Bercow's removal are few in number, but we should not underestimate their determination. Were their plot to succeed, it would not just remove a reforming Speaker, but threaten parliamentary democracy itself.

Now, however, there is a new threat, from two mavericks, who appear to be trying to take advantage of the anti-politics mood by targeting a man who, ironically, is parliament's best hope for reform following the expenses crisis. Bercow is being got at from the right by the blazer-and-cravate smoothie Nigel Farage, of the Dad's Army party, Ukip. And from the left, we have John Stevens, a former Liberal Democrat and a passionate pro-European.

Now, as it happens, I have met both these challengers, and they are amiable and intelligent. In any other circumstances -- and any other constituency -- they would deserve a decent shot at entering the Commons. But by going after Bercow, they are not playing fair. Farage cannot expect his pressure-group-party to be taken seriously if it seeks to breach an important convention adopted by all three main parties.

As for Stevens, he has just been rebuked by the Liberal Democrats for seeking to claim the support of the Lib Dem spokesman for Buckingham, Marie-Louise Rossi. The chair of South Central Region Liberal Democrats, Steve Sollitt, has issued a statement saying:

We understand that a candidate in the Buckingham constituency has been circulating a leaflet which implies our support. This comment had not been signed off by either our parliamentary spokesperson, Marie-Louise Rossi, or by the Buckingham Constituency Liberal Democrats. The Liberal Democrats are not supporting John Stevens or any other candidate in the Buckingham constituency.

Meanwhile, posters are mysteriously springing up across Buckingham -- "Get Flipper Bercow Out" -- without any official imprint. There is the air of dirty tricks around.

Now, I don't intend to make declarations of support in this campaign. But I am in line with convention by coming to the defence of the Speaker, who anyway is the last person who should be targeted by those seeking to ride the wave of an expenses backlash. Back in May 2009, before he became Speaker, I outlined the progressive case for John Bercow, a man of great independence of thought and a fundamental sense of fairness, and I believe it still stands:

Many feel that Bercow's bold approach to his party could be applied to parliament, and badly needed it is, too.

In January 2002, as shadow chief secretary to the Treasury, Bercow wrote a provocative New Year letter to his Buckingham constituency party. Many voters, he said, saw the Tories as "racist, sexist, homophobic and anti-youth". This observation marked the near-completion of his conversion from right-wing Conservative student and member of the anti-immigration Monday Club to ultramoderniser, years before David Cameron claimed the title of Tory "change" candidate.

Bercow's journey was influenced by his partnership with Sally Illman, an egalitarian Labour sympathiser whom he married in 2002. Yet it did not begin there. Some Tory MPs blame Illman, or "that woman", for his views, but his conversion was first made public on 10 February 2000, when he gave a 13-minute speech in favour of reducing the homosexual age of consent to 16. A month before his wedding in December 2002, Bercow resigned from the front bench over Iain Duncan Smith's decision to oppose the rights of unmarried and homosexual couples to adopt. His alienation from the party intensified when, in 2007, the government asked him to review services for children and young people with special speech, language and communication needs. Since then, he has kept a relatively low profile, becoming as resented by Tory traditionalists as he is admired by progressives in other parties.

. . . For all his despair at the pomp and ceremony of the Palace of Westminster, Bercow remains a House of Commons man to the core. He is a long-time believer in reform, not just in the wake of the expenses scandal, from which he has emerged (so far) unscathed, but in terms of wider, fundamental change. Since his departure from front-line party politics he has focused partly on redressing the balance between the overmighty executive and the legislature, calling in 2005 for select committees to be strengthened by election.

One admirer on the left says Bercow is "a genuine liberal -- as opposed to a paint-spray liberal". But as well as being socially liberal, he believes . . . that "modernisation" concerns fundamental issues such as tax, redistribution and immigration. The son of a minicab driver, with no private wealth, Bercow is, to many of his colleagues, "not one of us". Already there is a campaign to undermine him, led by Tory MPs who are keen to talk up the need for an "interim" speaker, possibly Ann Widdecombe. However, such a compromise would not produce the fresh start needed. These same Tories say that Bercow is too young and hasn't been in the House long enough. Yet, at 46, he is four years older than his party's candidate for prime minister, and became an MP four years earlier, in 1997.

. . . When he wrote his damning constituency letter in 2002, Bercow added that his party was "in worse shape than ever before in my lifetime or yours". Today, the same could be said of the standing of parliament. Traditional Tory hostility to Bercow may in the end prevent him from becoming Speaker, but that he is the true change candidate is not in doubt.

To conclude, I would only echo the words of David Cameron, and say that voters in Buckingham of all parties and none should re-elect John Bercow, who has a great plan of reform that Westminster badly needs. They should do so for the sake of his constituency and for the sake of the future of our national politics.

James Macintyre is political correspondent for the New Statesman.
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?