The rise and rise of the food bank

They call it a "bank" for a reason.

A woman walks into the Kings Church centre, her hands thrust deep into the pockets of a sports jacket twice her size. On the run from domestic abuse, she’s only been in the city two weeks and she’s hungry.

Inside it’s warm, fluorescently lit and smells faintly of disinfectant. The other visitors sitting at old computers in jeans and trainers don’t notice her enter. The only clue about what the centre offers is an abandoned trolley in one corner and some volunteers sorting through tins behind a counter. She looks around, “Is this a homeless shelter or something?” she asks.

More people are visiting food banks every day. There are now over 200 operating across the UK, serving everywhere from the densely concentrated poverty of Tower Hamlets to the rural poverty of Okehampton and the isolated highlands around Inverness.

The biggest is in Coventry, where over 7,000 people have walked away with packs of tinned food, sugar and tea since it launched last year. In a time of economic decline, the number of people visiting food banks doubled to 128,967 last year.

With no sign of the economy recovering, experts predict that they will be serving over half a million people by the next election. Two more open every week.

“Inflation in food, rising living costs and falling wages all push people to count their pennies, and a huge volume of people are finding that they can’t make it to the end of the week,” says Chris Mould, executive chairman of the Trussell Trust which operates the only network of food banks in the UK, “After two or three years of hardship people run out of people to ask for help, and savings have all diminished. This country is facing some hard truths.”

Everyone has their own story about why they came to a food bank, but two big factors play a part in most of them.

Some 29 per cent of visitors say that they have been forced to look for help because of benefits changes. Even if you’re entitled to help under the government’s new system, a six-week delay is standard.

In that space, some of the most vulnerable are left with nothing. But benefits are not the only reason. Low pay is more commonly cited as a reason for seeking help than unemployment, with some 19% of foodbank visitors finding that their wages cannot meet basic costs. Visitors have been let down by the market as well as the state.

Portsmouth food bank operates on the same principle to those across the UK. Those in need are given vouchers by partner agencies – Sure Start centres, social services, schools etc – and that entitles you to free bundle of soup, beans, rice pudding, tinned tomatoes, tea, cereal and other basics.

The food is nutrionally balanced, but the supply isn’t endless. Each voucher entitles you to three days worth of food, and each guest is only allowed three vouchers. Foodbanks are supposed to provide help in a crisis, not a long-term supply.

Although the need for food banks might be dark, their existence offers hope. With no government funding, they are a fantastic example of community action. According to the Trussell Trust, some 1,225 tonnes of food were donated last year, distributed by some 4,360 volunteers in partnership with 1,423 schools and 2,025 churches.

The organisation is religious, but their help comes with no ties, and although the Portsmouth bank has won some rare funding from the Lottery to support their work, most of the food comes from local donations.

Dotted around Portsmouth’s supermarkets you’ll see donation points where you can give away one or two items from your weekly shop. Volunteers stand outside shopping centres with lists of particular things they’d love you to pick up.

“Local communities are really bothered about the impact of the recession,” says Mould, who eventually wants to see some 700 foodbanks across the country, “As soon as you highlight that their neighbours are suffering people want to do something. It’s very heartwarming. They will help if there’s something practical they can do.”

They call it a food “bank” for a reason. Volunteers are encouraged to leave a deposit today, because tomorrow they might need to make a withdrawal. People like Kelly who have relied on foodbanks to get them through a crisis often come back when they’re on their feet, walking in with overflowing bags of shopping and smiling because they want to give something back.

This builds ownership. When a community is asked to help it makes them think about the poverty on their doorstep. It forces them to engage with poverty and take responsibility for it in a way that blind state services might not. This is important.

As Mant said as the bank closed for the day, "Any of us could find ourselves in the same position, but for the Grace of God.”

 

Donations of food are stacked on shelves at a foodbank centre in Salisubury. Credit: Getty Images

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

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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?