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The bankers cannot believe their luck

The disgrace of the political class has been the salvation of the bankers. And lax regulation has le

Until the drama over MPs’ expenses, workers in the financial services had been reeling from a succession of blows: collapsing banks, nationalisations, frozen bonuses, job losses and contemptuous, withering condemnation by the public and by opinion-formers in the media, church pulpits and parliament. An optimistic scenario was one of slow rehabilitation under a less permissive regime involving tougher regulation, partial public ownership of banks and a diminished, chastened City.

Now the bankers can’t believe their luck. A couple of days after the first revelations in the Daily Telegraph, the headline in the City’s free newspaper City AM was a shout of orgasmic release: “Now THEY can’t lecture US.” It said it all. Collapse of moral authority and politicians’ will. Back to business as usual.

The dangers of drift were highlighted in the speech given at Mansion House on 17 June by Mervyn King, governor of the Bank of England. He publicly expressed discomfort at the idea of banks that are “too big to fail”: he has concluded that such banks are simply too big. But the government is reluctant to tackle these banks, as the conduct of Lord Myners and the institutionalised passivity of UK Financial Investments Ltd (UKFI) – the Treasury-backed bank shareholder body – indicates. Instead, there seems to be a yearning to disengage government from the financial sector as quickly as possible. Political developments have made that disengagement easier to achieve, now that parliamentarians, including members of the Treasury select committee, have been collectively discredited, and power within the Labour government has shifted from a wounded Prime Minister to a revitalised Chancellor articulating the Treasury line.

It is deeply worrying that some of the most important policy questions for a generation are now being decided by default and in a political vacuum. How can a semi-nationalised banking system best serve the different but overlapping interests of UK bank borrowers, depositors and taxpayers, as well as private shareholders and bank executives? How should the systemic risks of banking – and the City generally – be managed through regulation, in order to safeguard the wider UK economy? Most important, is it actually possible for the UK to play host to a major financial service sector?

The response to all these questions is a lazy, uncritical, self-serving one: that, bar a few regulatory tweaks that will need to be made, the previous regime was essentially fine. The bankers’ view is that UK politicians need to get off their backs as quickly as possible and get the banks back into the private sector; to reverse “penal” (ie, 50 per cent) marginal tax rates; and to stop the European Commission, or more self-confident UK regulators, from “undermining the City’s competitiveness”. These arguments are winning.

Indeed, there is a danger that the counter-revolution could soon become a rout.

Yet it is only a matter of months since half of the British banking system collapsed and had to be rescued by the state through total or partial nationalisation. Thanks to that intervention, the banks have stabilised (if nothing more). Several small banks are now fully nationalised; RBS and the Lloyds Banking Group are partly nationalised; the two remaining global banks (HSBC and Barclays), along with the remainder of the sector, depend on a variety of implicit or explicit guarantees.

How we got to that point has been discussed elsewhere (including in my book The Storm): I am now concerned with the future. There is a bifurcation of paths opening up. One route builds on the experience of recent bank crises in Scan­dinavia, Israel, Korea and elsewhere, including the US, whose so-called Resolution Trust model helped to limit the savings and loans crisis of the late 1980s and early 1990s. Following this route, the state leads and manages a clean-up and restructuring of banks, usually within a decade or so. Approaches have varied, but there are some common elements: the wiping clean of the slate, in respect of losses incurred by existing private shareholders and the removal of failed management; fresh, taxpayer equity capital; structures to ensure that lending can continue unhindered to good, solvent borrowers; the valuation and active management of “bad” assets, in order to retrieve whatever value is left; then, in due course, the selling off of some or all publicly owned banks to achieve maximum return to the taxpayer and leave a varied ecology of properly regulated national banking institutions.

Some of us thought that was where the government was originally heading. After the October rescue, there were some tough-sounding conditions on new lending and curbing bonuses and, for a while, as it basked in the glow of in­ternational approval, the government seemed to be on the right track.

But it has gradually become apparent that we are being taken down a different route, where government money and guarantees are used to facilitate a quick return to “business as usual”. UKFI has been populated by financiers rather than business people with experience as bank customers. The public-sector shareholders seem to have had no quarrel with bank management’s efforts to build profitability and deleverage as quickly as possible.

The Asset Protection Scheme introduced in January also provides insurance cover for “toxic assets”, which means the government has taken on an open-ended risk without a corresponding “upside” for the taxpayer. This route was chosen in preference to fresh government equity capital precisely because it makes a quick return to private-sector ownership easier. There is now a danger of premature reprivatisation, which would leave the taxpayer with a vast toxic dump of losses and a poor price for the share sale. There are already rumours that Northern Rock is being lined up for a rapid sale.

If banks are to return to “normal” commercial operation under private ownership, the issue arises of how they should be regulated. The Cruickshank report on banking, commissioned by Gordon Brown a decade ago, posed the central question: why should banks be allowed to pursue the maximisation of shareholder value – and management bonuses – when they are underwritten by the taxpayer? This question has never been answered properly. Banks should either surrender their protection and compete like other firms, or be protected and have their profit regulated like utilities. In the wake of a banking crisis, the logic is even starker. In the past few weeks we have seen leading executives at Barclays awarding themselves millions while the bank ultimately remains dependent on government guarantees, despite its precarious independence. It is not surprising that executives of the semi-nationalised banks want to follow suit.

What has brought the issue to a head is the judgement that the major UK-based banks are “too big to fail” and have to be rescued in a financial emergency. This concept is an economic and democratic outrage. Either they must be subject to tight state control or they should be broken up so that they are not “too big to fail”. The point has been grasped, improbably, by ministers in banker-friendly countries such as Switzerland, and by our own central bank’s governor. Yet ministers today seem no less terrified of confronting the banks than when Brown initially fled the battlefield a decade ago.

One solution would be to restrict protection, including deposit protection, to “narrow banks”, confined to lending out no more than they receive in deposits. Other banks would operate competitively but be stripped of any protection. I, for one, am attracted to the concept; but it would involve a revolutionary change, a discontinuation of fractional banking altogether, and in the short run it is unlikely to be adopted.

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­Who said what about
the banking crisis

The financial services sector in Britain, and the City of London at the centre of it, is a great example of a highly skilled, high-value-added, talent-driven industry that shows how we can win in a world of global competition.
Gordon Brown, June 2007

When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance.
Chuck Prince, Citigroup CEO, July 2007

We cannot have a situation where the banks are able to privatise their profits and nationalise their losses.
Vince Cable, April 2008

We can’t tell every bank what to do.
Alistair Darling, April 2008

Where there is excessive and irresponsible risk-taking, that has got to be punished. The day of big bonuses is over.
Gordon Brown, October 2008

We had ten years of record growth when I was prime minister. I have, unfortunately, come to the conclusion that it was luck.
Tony Blair, January 2009

The government is clearly playing for time in order to avoid doing anything to upset the bankers.
Vince Cable, February 2009

Royal Bank of Scotland has the largest balance sheet in world banking so it is critical that Stephen succeeds.
Sir Philip Hampton, RBS chairman, defends the pay deal for the new RBS CEO, Stephen Hester, worth up to £9.6m, June 2009

A less drastic way of dealing with overgrown banks would be to split off the investment banking arms of the main global banks – what Mervyn King calls the “casinos” – and to confine government protection to the remaining “traditional” banking wings. These would then operate as regulated utilities: the model that broadly prevailed in the United States before the repeal of the Glass-Steagall Act a decade ago. The urgent need to change our system is highlighted by the ambition of Barclays Capital to become “the premier global investment bank”: it is madness for the British taxpayer to be a last-resort guarantor for this kind of business. To be sure, the demarcation is not clear-cut: there is high-risk “traditional” banking and low-risk investment banking, and the separation of roles would not be straightforward. The big banks – HSBC and Barclays – argue that they would be stopped from tapping into the securitisation markets (which may, after recent disasters, not be quite the loss they believe it to be). There is also the implied threat that global banking operations will be withdrawn from the UK.

The government must face down this kind of blackmail. The British taxpayer simply should not be made responsible for the risks that global banks take outside our regulatory jurisdiction. There are undoubtedly technical difficulties in separating out those aspects of global banks that the government can guarantee and those it cannot, but these problems cannot be an excuse for bottling out completely.

One lesson of the financial crisis is that the “light-touch” regulatory approach was a failure. It may have failed in part because of the poor quality of bank supervision rather than the absence of regulation. And the rapid innovation of capital markets undoubtedly ran ahead of regulators’ capacity to monitor activity effectively. But the vast cost to the British taxpayer – and the wider economy – of the banks’ failure and the consequent bailout make it imperative that regulation be strengthened.

We are now at a crunch point. The need to strengthen and update the regulatory regime has collided with the financial institutions’ growing confidence that they can keep the state off their backs. Self-serving arguments are being employed, notably that regulation will suppress “innovation”. It will. It should. We need more financial “innovation” like a hole in the head.

The other argument is that regulation (and 50 per cent tax rates) will undermine the City’s “competitiveness” and “drive away” banking and non-bank financial institutions. This argument has to be met head-on; the idea of a regulatory race to the bottom does not square with political and economic reality. Co-operation rather than regulatory arbitrage between the main jurisdictions will always be best, but if that co-operation does not materialise, the UK should not chase business by offering low standards that create wider risks for the UK economy. The arguments about City “competitiveness” are bogus, self-serving and dangerous. It is profoundly to be hoped that Brown, Alistair Darling, Ed Balls and others who fell for them so haplessly in the past have now learned their lesson.

The new regulatory agenda espoused by Lord Turner, chairman of the Financial Services Authority, is sensible and not especially controversial. Indeed, many in the City see it as a minor irritation, followed by a green light to get back to business as “normal”. It contains sensible elements – such as “macro prudential regulation” that would focus on systemic risks, rather than regulation of individual banks – and more controversial but basically prudent ideas, such as limiting loan-to-value ratios and/or multiples of income for mortgage lending.

Lord Turner has also supported the argument that the most dangerous forms of risk-taking in banking institutions can be limited by paying bonuses not in cash but in stock, redeemable after a period of years. As stock prices are depressed and the capital gains tax payable is only 18 per cent, any half-sober City trader will have worked out he should be doing this in any event. But it is not a silver bullet – the bosses at both Lehman Brothers and Bear Stearns had huge equity-related incentives, and look where they are today. These issues require pause for thought: there are bigger regulatory battles shaping up.

One concerns the proposal to establish a clearing house for complex financial derivatives so that they can be traded, netted and regulated. Properly regulated, these activities can spread risk and, in a general sense, add to stability. What is much more dangerous, as the recent financial crisis has illustrated, is to have a vast pyramid of paper claims – as in the CDS/CDO (credit default swap/collateralised debt obligation) “markets” – which cannot be settled in an orderly way through a clearing house. Important lessons can be learned from the recent collapse of General Motors. CDS contracts with a value in excess of $35bn were netted down to $2.2bn, causing little more than a ripple in the overall CDS market. The danger is that nothing will be done, setting up a huge systemic risk – and the next big crash.

One practical remedy would be to establish a clearing-house system as soon as possible. Big banks that make a lot of money from OTC (“over-the-counter”) trading are not happy: if they were forced to use a regulated exchange they would lose this business. In practice, complex, structured derivatives would therefore be prevented. A second issue is whether the London Stock Exchange – and the Bank of England as the lender of last resort – are big and strong enough to support a clearing house dealing with transactions valued at many times the size of the world economy. Co-operation with the US is potentially important. And perhaps a European approach is required, in order to draw on the bigger firepower of the European Central Bank, but that may unleash some dangerous political demons.

Meanwhile, the European Union has precipitated another major regulatory battle by putting forward proposals, both for strengthening European co-operation over bank supervision – reluctantly conceded to by the UK – and for toughening the regulation of hedge funds and private equity. Britain’s financial community has a collective paranoia about Europe, and there is envy of London’s currently predominant role and a distaste for the freewheeling “Anglo-Saxon” model (not that German, Dutch or even French banks behaved very differently in the crisis).

However, it is surely eminently sensible to ask, as the European Commission is doing, whether these new forms of financial intermediation are healthy and adequately regulated. There are some critics who question the value of hedge funds altogether and would be happy to see them regulated out of existence. But a more relaxed view is that there is a role for specialist financiers who pursue high yield via high risk – provided they do not depend on taxpayers’ guarantees or indirectly contribute to the systemic risk that taxpayers underwrite. The former has not been a problem in the recent crisis (no hedge fund has asked for government help), but the latter undoubtedly is. There is a proper debate to be had as to how hedge funds should be regulated: to treat the tentative proposals of the European Commis­sion as akin to a Napoleonic invasion threat is simply idiotic.

There is a more fundamental argument about the scale of Britain’s financial services industry in relation to the UK economy. I wouldn’t expect the City to vote for contraction, or for curbs on its freedom to operate, any more than I would expect turkeys to vote for Christmas. But the poultry farmer – the Labour government – cannot just ask the turkeys what they want. He has to be willing to wield a knife and cut some throats. A combination of national, European and global regulation is necessary to ensure that the vast negative externalities associated with the City do not exceed the (genuine) benefits that the UK economy derives from a successful, internationally traded, financial services sector. In addition, there will have to be a major structural adjustment out of traded financial services into other services and manufacturing.

Unfortunately a weak, demoralised, delegitimised Labour government is in no shape to face this challenge, and a Tory government pumped up by City donations would have no need or inclination to take it on. The opportunity for reform and renewal is passing us by and, if it does, financial crises will return with even greater ferocity in years to come.

Vince Cable, economic spokesman for the Liberal Democrats, is the author of “The Storm: the World Economic Crisis and What It Means”, published by Atlantic Books (£14.99)

This article first appeared in the 29 June 2009 issue of the New Statesman, The Great Escape

MARTIN O’NEILL
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The new young fogeys

Today’s teens and twentysomethings seem reluctant to get drunk, smoke cigarettes or have sex. Is abstinence the new form of youth rebellion?

In a University College London lecture theatre, all eyes are on an elaborate Dutch apple cake. Those at the back have stood up to get a better look. This, a chorus of oohs and aahs informs me, is a baked good at its most thrilling.

In case you were wondering, UCL hasn’t rented out a room to the Women’s Institute. All thirty or so cake enthusiasts here are undergraduates, aged between 18 and 21. At the third meeting this academic year of UCL’s baking society, the focus has shifted to a Tupperware container full of peanut butter cookies. One by one, the students are delivering a brief spiel about what they have baked and why.

Sarah, a 19-year-old human sciences undergraduate, and Georgina, aged 20, who is studying maths and physics, help run the baking society. They tell me that the group, which was set up in 2012, is more popular than ever. At the most recent freshers’ fair, more than 750 students signed up. To put the number in perspective: that is roughly 15 per cent of the entire first-year population. The society’s events range from Great British Bake Off-inspired challenges to “bring your own cake” gatherings, such as today’s. A “cake crawl”, I am told, is in the pipeline. You know, like a pub crawl . . . but with cake? Georgina says that this is the first year the students’ union has advertised specifically non-drinking events.

From the cupcake boom to the chart-topping eminence of the bow-tie-wearing, banjo-plucking bores Mumford & Sons, the past decade of youth culture has been permeated by wholesomeness. According to the Office for National Statistics (ONS), this movement is more than just aesthetic. Not only are teenage pregnancies at their lowest level since records began in the 1960s, but drug-taking, binge drinking and sexually transmitted infections among young people have also taken significant dives. Drug use among the under-25s has fallen by a quarter over the past ten years and heavy drinking – measured by how much a person drinks in an average week – is down by 15 per cent. Cigarettes are also losing their appeal, with under-25 smokers down by 10 per cent since 2001. Idealistic baby boomers had weed and acid. Disaffected and hedonistic Generation X-ers had Ecstasy and cocaine. Today’s youth (which straddles Generations Y and Z) have cake. So, what shaped this demographic that, fairly or otherwise, could be called “Generation Zzzz”?

“We’re a lot more cynical than other generations,” says Lucy, a 21-year-old pharmacy student who bakes a mean Welsh cake. “We were told that if we went to a good uni and got a good job, we’d be fine. But now we’re all so scared we’re going to be worse off than our parents that we’re thinking, ‘Is that how we should be spending our time?’”

“That” is binge drinking. Fittingly, Lucy’s dad – she tells me – was an anarchist with a Mohawk who, back home in the Welsh valleys, was known to the police. She talks with deserved pride about how he joined the Conservative Party just to make trouble and sip champagne courtesy of his enemies. Lucy, though decidedly Mohawk-free, is just as politically aware as her father. She is concerned that she will soon graduate into a “real world” that is particularly hard on women.

“Women used to be a lot more reliant on men,” she says, “but it’s all on our shoulders now. One wage isn’t enough to support a family any more. Even two wages struggle.”

***

It seems no coincidence that the downturn in drink and drugs has happened at the same time as the worst financial crisis since the Great Depression. Could growing anxiety about the future, combined with a dip in disposable income, be taming the under-25s?

“I don’t know many people who choose drugs and alcohol over work,” says Tristan, a second-year natural scientist. He is one of about three men at the meeting and it is clear that even though baking has transcended age it has yet to transcend gender to the same extent. He is softly spoken and it is hard to hear him above a room full of sugar-addled youths. “I’ve been out once, maybe, in the past month,” he says.

“I actually thought binge drinking was quite a big deal for our generation,” says Tegan, a 19-year-old first-year linguistics undergraduate, “but personally I’m not into that. I’ve only been here three weeks and I can barely keep up with the workload.”

Tegan may consider her drinking habits unusual for someone her age but statistically they aren’t. Over a quarter of the under-25s are teetotal. Neither Tegan nor Lucy is dull. They are smart, witty and engaging. They are also enthusiastic and seemingly quite focused on work. It is this “get involved” attitude, perhaps, that distinguishes their generation from others.

In Absolutely Fabulous, one of the most popular British sitcoms of the 1990s, a lot of the humour stems from the relationship between the shallow and fashion-obsessed PR agent Edina Monsoon and her shockingly straitlaced teenage daughter, Saffie. Although Saffie belongs to Generation X, she is its antithesis: she is hard-working, moral, politically engaged, anti-drugs and prudishly anti-sex. By the standards of the 1990s, she is a hilarious anomaly. Had Ab Fab been written in the past couple of years, her character perhaps would have been considered too normal. Even her nerdy round glasses and frumpy knitted sweaters would have been considered pretty fashionable by today’s geek-chic standards.

Back in the UCL lecture theatre, four young women are “geeking out”. Between mouthfuls of cake, they are discussing, with palpable excitement, a Harry Potter-themed summer camp in Italy. “They play Quidditch and everything – there’s even a Sorting Hat,” says the tall, blonde student who is leading the conversation.

“This is for children, right?” I butt in.

“No!” she says. “The minimum age is actually 15.”

A kids’ book about wizards isn’t the only unlikely source of entertainment for this group of undergraduates. The consensus among all the students I speak to is that baking has become so popular with their demographic because of The Great British Bake Off. Who knew that Mary Berry’s chintzy cardigans and Sue Perkins’s endless puns were so appealing to the young?

Are the social and economic strains on young people today driving them towards escapism at its most gentle? Animal onesies, adult ball pools (one opened in west London last year) and that much-derided cereal café in Shoreditch, in the East End, all seem to make up a gigantic soft-play area for a generation immobilised by anxiety.

Emma, a 24-year-old graduate with whom I chatted on email, agrees. “It feels like everyone is more stressed and nervous,” she says. “It seems a particularly telling sign of the times that adult colouring-in books and little, cutesy books on mindfulness are such a massive thing right now. There are rows upon rows of bookshelves dedicated solely to all that . . . stuff.” Emma would know – she works for Waterstones.

From adult colouring books to knitting (UCL also has a knitting society, as do Bristol, Durham, Manchester and many more universities), it is hard to tell whether the tsunami of tweeness that has engulfed middle-class youth culture in the past few years is a symptom or a cause of the shrinking interest in drugs, alcohol, smoking and other “risk-taking” behaviours.

***

Christine Griffin is Professor of Social Psychology at Bath University. For the past ten years, she has been involved in research projects on alcohol consumption among 18-to-25-year-olds. She cites the recession as a possible cause of alcohol’s declining appeal, but notes that it is only part of the story. “There seems to be some sort of polarisation going on,” Griffin says. “Some young people are actually drinking more, while others are drinking less or abstaining.

“There are several different things going on but it’s clear that the culture of 18-to-25-year-olds going out to get really drunk hasn’t gone away. That’s still a pervasive social norm, even if more young people are drinking less or abstaining.”

Griffin suggests that while frequent, sustained drinking among young people is in decline, binge drinking is still happening – in short bursts.

“There are still a lot of people going to music festivals, where a huge amount of drinking and drug use goes on in a fairly unregulated way,” she says. It is possible that music festivals and holidays abroad (of the kind depicted in Channel 4 programmes such as What Happens in Kavos, in which British teenagers leave Greek islands drenched in booze and other bodily fluids) are seen as opportunities to make a complete escape from everyday life. An entire year’s worth of drinking, drug-taking and sex can be condensed into a week, or even a weekend, before young people return to a life centred around hard work.

Richard De Visser, a reader in psychology at Sussex University, also lists the economy as a possible cause for the supposed tameness of the under-25s. Like Griffin, however, he believes that the development is too complex to be pinned purely on a lack of disposable income. Both Griffin and De Visser mention that, as Britain has become more ethnically diverse, people who do not drink for religious or cultural reasons – Muslims, for instance – have become more visible. This visibility, De Visser suggests, is breaking down taboos and allowing non-mainstream behaviours, such as not drinking, to become more socially accepted.

“There’s just more variety,” he says. “My eldest son, who’s about to turn 14, has conversations – about sexuality, for example – that I never would’ve had at his age. I think there’s more awareness of alcohol-related problems and addiction, too.”

De Visser also mentions the importance of self-image and reputation to many of the young non-drinkers to whom he has spoken. These factors, he argues, are likely to be more important to people than the long-term effects of heavy drinking. “One girl I interviewed said she wouldn’t want to meet the drunk version of herself.”

Jess, a self-described “granny”, is similarly wary of alcohol. The 20-year-old Liverpudlian, who works in marketing, makes a bold claim for someone her age. “I’ve never really been drunk,” she says. “I’ve just never really been bothered with alcohol or drugs.” Ironically, someone of her generation, according to ONS statistics, is far more likely to be teetotal than a real granny at any point in her life. Jess says she enjoys socialising but her nights out with close friends are rather tame – more likely to involve dinner and one quick drink than several tequila shots and a traffic cone.

It is possible, she suggests, that her lack of interest in binge drinking, or even getting a little tipsy, has something to do with her work ethic. “There’s a lot more competition now,” she says. “I don’t have a degree and I’m conscious of the need to be on top of my game to compete with people who do. There’s a shortage of jobs even for people who do have degrees.”

Furthermore, Jess says that many of her interactions with friends involve social media. One theory put forward to explain Generation Zzzz is that pubs are losing business to Facebook and Twitter as more and more socialising happens online. Why tell someone in person that you “like” their baby, or cat, or new job (probably over an expensive pint), when you can do so from your sofa, at the click of a button?

Hannah, aged 22, isn’t so sure. She recently started her own social media and communications business and believes that money, or the lack of it, is why her peers are staying in. “Going out is so expensive,” she says, “especially at university. You can’t spend out on alcohol, then expect to pay rent and fees.” Like Jess (and as you would probably expect of a 22-year-old who runs a business), Hannah has a strong work ethic. She also has no particular interest in getting wasted. “I’ve always wanted my own business, so for me everything else was just a distraction,” she says. “Our generation is aware it’s going to be a bit harder for us, and if you want to support yourself you have to work for it.” She also suggests that, these days, people around her age have more entrepreneurial role models.

I wonder if Hannah, as a young businesswoman, has been inspired by the nascent strand of free-market, “lean in” feminism. Although the women’s movement used to align itself more with socialism (and still does, from time to time), it is possible that a 21st-century wave of disciples of Sheryl Sandberg, Facebook’s chief operating officer, is forswearing booze, drugs and any remote risk of getting pregnant, in order to get ahead in business.

But more about sex. Do the apparently lower rates of sexually transmitted infections and teenage pregnancies suggest that young people are having less of it? In the age of Tinder, when hooking up with a stranger can be as easy as ordering a pizza, this seems unlikely. Joe Head is a youth worker who has been advising 12-to-21-year-olds in the Leighton Buzzard area of Bedfordshire on sexual health (among other things) for 15 years. Within this period, Head says, the government has put substantial resources into tackling drug use and teen pregnancy. Much of this is the result of the Blair government’s Every Child Matters (ECM) initiative of 2003, which was directed at improving the health and well-being of children and young adults.

“ECM gave social services a clearer framework to access funds for specific work around sexual health and safety,” he says. “It also became a lot easier to access immediate information on drugs, alcohol and sexual health via the internet.”

***

Head also mentions government-funded education services such as Frank – the cleverly branded “down with the kids” anti-drugs programme responsible for those “Talk to Frank” television adverts. (Remember the one showing bags of cocaine being removed from a dead dog and voiced by David Mitchell?)

But Head believes that the ways in which some statistics are gathered may account for the apparent drop in STIs. He refers to a particular campaign from about five years ago in which young people were asked to take a test for chlamydia, whether they were sexually active or not. “A lot of young people I worked with said they did multiple chlamydia tests throughout the month,” he says. The implication is that various agencies were competing for the best results in order to prove that their education programmes had been effective.

However, regardless of whether govern­ment agencies have been gaming the STI statistics, sex education has improved significantly over the past decade. Luke, a 22-year-old hospital worker (and self-described “boring bastard”), says that sex education at school played a “massive part” in his safety-conscious attitude. “My mother was always very open [about sex], as was my father,” he says. “I remember talking to my dad at 16 about my first serious girlfriend – I had already had sex with her by this point – and him giving me the advice, ‘Don’t get her pregnant. Just stick to fingering.’” I suspect that not all parents of millennials are as frank as Luke’s, but teenagers having sex is no longer taboo.

Luke’s attitude towards drugs encapsulates the Generation Zzzz ethos beautifully: although he has taken MDMA, he “researched” it beforehand. It is this lack of spontaneity that has shaped a generation of young fogeys. This cohort of grannies and boring bastards, of perpetual renters and jobseekers in an economy wrecked by less cautious generations, is one that has been tamed by anxiety and fear.

Eleanor Margolis is a freelance journalist, whose "Lez Miserable" column appears weekly on the New Statesman website.

This article first appeared in the 05 February 2015 issue of the New Statesman, Putin's war