Monarchy and the media

Will journalists report on the Queen's diamond jubilee in an impartial manner?

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As Britain's media gears up for the various jubilee celebrations, reporting every royal move, collating lists of trivia ("60 things you never knew and probably didn't need to know about the Queen" and so on) they face a real credibility problem. Last year was the same, with the royal wedding prompting journalists to compete with each other to come up with the most trite and inane commentary, or the most ludicrous or unbelievable 'fact' about the monarchy. This year already promises to be just as bad, if not worse.

That's why Republic has called on broadcasters especially, but journalists generally, to take extra care that they report the Queen's diamond jubilee "impartially, objectively and with real journalistic scepticism". The nation's relationship with the monarchy has changed completely since the 1977 jubilee and is utterly unrecognisable from the days of the Queen's coronation. Yet much of our media seems to want to will the British people back, in true Canute fashion, to their more royalist past, rather than reflect on the real public response to all this PR-led fanfare.

The monarchy is a highly contested and controversial institution. At least a quarter of Britons believe we'd be better off without it, more than half want an end to its state funding and two thirds want the royal household opened up to more scrutiny. Last year some 79 per cent said they weren't interested in the wedding and a Guardian ICM poll showed an increase in support for abolition in the run up to the wedding. Those viewpoints should be represented alongside the enthusiasm of monarchists and the indifference of many more.

When it comes to broadcast journalists there is a clear legal obligation to report in an impartial manner. Along with colleagues from Republic I met with BBC executives last year after accusing the corporation of 'abandoning journalistic integrity' in its coverage of the royal wedding. Unfortunately it seems the Beeb has not learnt any lessons, falling again into the habit of celebrating, not reporting the jubilee.

But it's not just legally obliged journalists that should be careful with their reporting, and I've called on all media outlets to present republican viewpoints alongside those of monarchists and, most importantly, to challenge and question the claims of Palace aides. Failure to do so not only fails the public by providing a one-sided picture of what's going on, it threatens the credibility of our media.

To highlight the point there are a number of assertions widely repeated by the media at the time of the royal wedding which were subsequently debunked. These include:

- The royal wedding would be a 'shot in the arm' for the economy. (The Office for National Statistics announced in July that it actually had a negative effect on economic growth. At the time we reminded the media of the CBI's calculation that an extra public holiday would wipe £6bn off the economy.)

- 'Two billion people' would watch the wedding on television. (Official figures revealed the real number was a fraction of this estimate, which was shown to be virtually impossible.)

- 'Millions' would hold street parties. (Republic's own freedom of information research revealed that only one in three councils received a single application for a street party, and three quarters received five applications or fewer.)

- The wedding would lead to a 'major boost' to Britain's tourism industry. (Another freedom of information investigation by Republic revealed that royal events actually have a negative impact on inbound tourism.)

The publicly-funded Palace PR machine is already in overdrive and it must not go unchallenged. All too often the spin and half-truths coming from royal aides are just accepted as fact. Yet those 'facts' are so far from the truth and so obviously manufactured for PR purposes that journalists would be doing the public a disservice by reporting them ad nauseum rather than challenging this very obvious spin-doctoring. There is, after all, a very good reason for the intense PR campaign being run by the palace: they know the public are fast losing interest in the royals, and that as the Queen nears the end of her life any residual affection for her is unlikely to transfer to her son and heir.

The BBC has an obligation to report impartially yet it fails hands down when it comes to its royal reporting, and many other journalists are all too eager to follow suit. The result is an undemocratic institution that is able to co-opt almost the entire media output of this country to its own advantage and a media that is failing to report the true story of a changing public attitude toward royalty and monarchy.

Graham Smith is chief executive officer of Republic

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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?