Why is Whirlwind Gove acting so fast?

By dismantling educational infrastructure at such a speed, Gove is ensuring that his successors as Education Secretary will struggle to reverse what he's done.

You have to admire Michael Gove, well, you don’t have to, but there’s no doubting he’s canny. Politicians are often criticised for how slow, sometimes painful the pace of change can be. Gove, on the other hand is a whirlwind. Change cannot happen quickly enough. Nothing will stop him. His Free School policy is enforced regardless of any or all local opposition. Even the law cannot stop a Free School from coming into existence. When planning permission was refused for a new one in Bedford, not once, but twice, Gove overruled the council, granting planning permission. Yet when it comes to a major injustice carried out against thousands of children, he failed to act. The English GCSE debacle this summer was a clear case of injustice. Gove decided not to act; indeed he compounded his failure by openly admitting that the examinations had been unfair on the pupils. The one man who had the power to right a wrong failed.

On the one hand, he claimed that he couldn’t intervene in the GCSE grading row as that’s the role of the exam regulator. Yet when a planning regulator makes an informed and proper decision, he feels it entirely appropriate to intervene and overrule. Why did he not act in the GCSE debacle? Because it suited him for the whole GCSE exam system to go into meltdown. His goal is to replace GCSEs with exams more akin to O levels. An ongoing row between schools, exam boards and the exam regulator was timely - perfect for the man who wants wholesale exam reform.

These are not the acts of an impartial education minister who cares about the fate of children. These are the acts of a cynical, ideologically-driven man with an agenda of educational genocide. Gove is determined to wipe out any vestige of a state-maintained education provision with the ultimate goal of privatising it. The lure for companies seeking to invest in our newly privatised system is that eventually they will profit from our schools and children. Gove is engaged in a power-grab - forcing unwanted, often unnecessary change that frequently flies in the face of evidence.

Yet Tories love and support him. Why? Their answer is simple. For too long our state schools have been failing our children and educational standards are too low with our international standing in league tables far below where we should be. Gove, as well as the Chief Inspector of Schools, Sir Michael Wilshaw, cites our low position in the Programme for International Student Assessment (PISA) table as evidence of our failing education system and justification for his academy programme and teacher education reforms. Unfortunately for Gove and Wilshaw, they were censured and criticised by the UK Statistics Authority for using "problematic" statistics to justify their reforms.

In the world of academia, evidence is supposed to inform practice. You’d expect evidence to inform government policy. The DfE has a whole section on its website devoted to evidenced based practice. Gove is keen to justify his policies with "evidence" from other countries, for example the success of Finland in international standings and the rising profile of the Far East. Sadly, on closer inspection, Gove’s evidence is highly selective and very biased. Take teacher education in Finland. He has often said that his goal is to emulate the high esteem with which teaching is held there and the highly competitive nature of entry into the profession which sees the best graduates applying. What Gove omits is the fact that teaching in Finland is a master’s degree profession that entails five years training. By comparison training in England is 36 weeks at most and not all at master’s level or resulting in a master’s degree. In 2010 Gove scrapped the master’s degree route for serving teachers and recently deregulated teaching in England to allow academies and free schools to employ, without restriction or training, unqualified teachers. As for professional status, he effectively destroyed teaching as a profession by shutting down the General Teaching Council, grabbing its powers for himself and the Teaching Agency, a part of the DfE.

This is Gove’s education hypothesis: our state system has failed and only by cherry-picking strategies and practices from other "more successful" countries can education be saved in England. But as Thomas Henry Huxley, Darwin’s bulldog and a great scientist, once said "the great tragedy of science [is] the slaying of a beautiful hypothesis by an ugly fact."

The great tragedy for Gove and his "beautiful hypothesis", is the "ugly fact" that came to light this week. Pearson - a global media and education company – published a league table of international educational achievement. The UK came sixth. Granted, Finland was top and the next four countries were all from the Far East, but sixth in an international comparison – where other European coutries and major powers like the USA struggle to get into the top twenty - is no mean achievement.

This is an inconvenience to Gove, but it will no doubt be ignored or brushed aside. The data used to compile this table was gathered between 2006 and 2010. Gove, of course, did not take office until 2010. Our international position in this table had more to do with the policies and achievements of the last Labour government, who were by no means perfect, but clearly didn’t fare too badly.

So the question remains, why is Gove rushing headlong into change with little regard to the actual evidence and scant regard for the views of professional educators?

The answer I fear is simple. Irreversibility. By systematically and deliberately dismantling the whole educational infrastructure and selling it off, piece by piece, to a wide range of private interests he is ensuring that future secretaries of state, of whatever political persuasion, cannot ever recreate a state education system. Once the schools have been sold off to private academy chains, once the playing fields have been replaced by housing estates or shopping centres, once teacher education has been excised from universities, the costs of recreating such an infrastructure would be so high that no future government, of whatever political persuasion, could afford it.

The DfE recently disclosed that the cost of their rapidly expanding academy programme incurred a £1bn pound overspend, at a time when public spending is being cut and we are in the grip of international recession, fighting to reduce our budget deficit. The total cost of Gove’s academy dream to date is £8.3bn. Costs that the DfE assures us have been "covered". Covered they may be, but at what cost to state-maintained schools? Refurbishment, rebuilding and investment in true state-maintained education is rapidly drying up. The only way to go if you have a leaky roof and no money to repair and maintain crumbling buildings is the Academy route, but even that does not guarantee a school that is structurally fit for purpose. So, a burning question remains: are Gove’s policies, based on ideology rather than evidence, fit for purpose, or, a danger to what is a basic human right – a free education for all that delivers opportunity for children rather than profit for global companies?

 

Michael Gove: whirlwind. 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?