A to B: Floating nowhere in particular at four miles per hour

Alan White drifts through the British canal network. Barring some unpleasantness at a lock, it is a bucolic week.

As the Oxford Canal passes Rugby, we see ghosts among the conifers and the grey flickers of out-of-town retail parks and industrial estates. We see them in bricked up tunnels, in old footpaths, in the viaduct that looms over the local golf course, in a long depression that runs through the nearby fields.

This landscape was once very different. The Leicester and Rugby Railway, the Great Central Railway and the Rugby and Stamford Railway all crossed the waterway within the space of a mile. The canal itself took a different, meandering route, veering north for a couple of miles to cross the River Swift, then looping back south to cross the River Avon. As our guidebook notes: “Paid by the mile, the contractors must have laughed all the way to the bank.”

But this was a different time. There was no need to spare expense: the canal was to be one of the most profitable transport networks in Britain, shifting masses of coal from the Midlands to London, along with some stone and agricultural products. The waterway was modernised in 1834 in response to a proposal for a London and Birmingham canal that would bypass Oxford completely. It never happened, but the Oxford company had money to burn, so it shortened the route by 11 miles with a series of embankments and aqueducts.

This “modern” route remains the same, and for the next week it will be home for the three of us. The diesel engine at the stern hums. Civilisation recedes. I light a cigarette. We're flitting between the Warwickshire and Northamptonshire borders. The landscape is verdant now, the past little more than shadows – Victorian canal company insignias on passing concrete fence posts, the crenulations of nearby fields from the ridges and furrows of mediaeval farmers, the trackbed of the old Great Central Railway hiding behind the foliage.

We’ve known each other for years. We’ve nothing important to say. One sits at the front of the boat, alone, the other two by the tiller, in silence, for hours. If we do talk, it’s quiet and terse – where we might stop, or things we can see. Occasionally, an adjective spills out, unacknowledged. “Pretty.”

Work, gossip about our other friends, the detritus of life: all recede slowly into the distance. We start drinking the whiskey once we’re a few miles out of Rugby. We’ll be encased in a soft blanket of booze every day: never quite wrecked, never quite crisp. We travel at a steady four miles per hour. Time eats distance – it takes over an hour to reach Hillmorton locks; a journey that would have taken 10 minutes by car.

***

The lock is the canal’s ingenious answer to gradients. It’s a chamber with gates at either end that either fills or empties with water according to whether the boat passing through is heading up or down the slope. We see the gates a few hundred yards up ahead. Two of us grab our wrenches, jump off the boat, and jog down the towpath, while the other cuts the engine and waits. We arrive at the gate and inspect the lock. It’s empty, so the two of us get down and begin to shove on the huge timber beam attached to the gate. It swings open, and we signal for the boat to begin its steady progress into the narrow chamber.

Once inside, we shove the gate closed, then I walk across the top of it to the opposite towpath. We make our way up to the gate at the other end. Now it’s time to fill the lock with water. We just have to walk up to the paddles on either side, attach our windlasses to the spindles, release the safety catches, and gradually raise them, allowing water from the higher level to enter the chamber. It’s a simple process, but there are plenty of things that could go wrong. The boat can catch on the lock wall, gate or cill, which would flood or even sink it. If accidentally released, the windlass can fly off the spindle: a heavy lump of metal travelling at that speed could cause a serious injury. The closed gates, which we use as a makeshift bridge, are barely a foot wide and often slippy. It can be a long drop into the chamber, and the flowing water means anyone who falls in will be not only cold, but less buoyant.

None of these things are likely. But if you work the locks enough – and we will, at least a few dozen times in the course of this trip - you know it’s a good idea to have your wits vaguely about you. It’s on our third day that something goes wrong. We arrive at a lock to find a middle-aged lady already in the process of emptying it so her boat, piloted by her husband, can pass in the opposite direction to us.

Women like her are one of many peculiar elements of canal life. You’ll see many retired couples. Typically, they’ll own an opulent boat that’s their pride and joy, and will be accompanied by a small dog. In every single case the man will drive the boat, while the woman - never a day under 50 - will do the heavy physical labour of the lock work. On our boat there are two of us working the locks, both in our thirties, and we’re exhausted at the end of every day. These women never seem perturbed by the bizarre division of labour. It’s just how it’s done on the canals.

This woman is typical of her kind - small, wirily strong, and accompanied by a border collie that seems only slightly more energetic than her. We exchange small talk: the only kind you can have at a lock. Generally, you ask where someone’s stopping. Then you ask what’s there, even though you know. I cross to the other side of the canal and get to work on the other paddle.

The problem starts once we’ve emptied the lock and are beginning to open the gates to allow her husband out. He nods a gruff acknowledgement. He doesn’t like us. We’re too young, and our card is marked by the fact we’re driving a hire boat rather than one we own. As the gate begins to swing open, the woman’s dog takes a sudden liking to me. It runs to the end of the lock and onto the gate just as it begins to move. Suddenly, what was a bridge is now a 15-foot-drop into an ice cold canal with a boat weighing at least a dozen tons powering through it.

The dog looks ahead to see its walkway disappear, and digs its claws into the top of the gate, cowering. The woman begins to scream. The man begins to shout something, but his voice is drowned out by the engine. The dog looks up at me, tensing its legs as it gets ready to jump across to my side of the bank. He won’t make it - with every millisecond that passes, the gap from gate to bank is getting wider.

I scream: “Stay!” and hold my hand up, desperate the dog will do as it’s told. It feigns to jump, but instead remains on the gate, shivering. “Stay!” “Stay!” The boat passes. I frantically heave against the gate’s timber beam to close it. The dog scampers across to me and wags its tail as if nothing has happened. The woman runs over and thanks me, curtly. She thinks I accidentally called the dog over to me, but doesn't want to say anything.

I suspect her thanks would have been curt regardless. We’ve broken the rules of the canal by involving her in a situation for which more was called than basic social interaction. There’s a strange, almost oriental formality to the exchanges that take place around the locks. It’s not that people on the canal are unfriendly. It’s that there’s a mutual understanding they’ve chosen this place because they want to escape everything else.

You have the retired couples, of course - and the more you travel the more you begin to pick out the subtle variations in wealth and class. More middle class generally means a more homely boat: there’ll be a garden growing on the roof, and a kitchen festooned with pictures of their offspring. Copy of the Mail somewhere. Upper-middle class generally means a more nautical vibe. Lots of bottles of wine on board, matching sweaters draped over the handrail; a boat name, hand painted in gold, like “Serenity” or “Wind Dancer”. I’ve seen an HMS before. They take the Telegraph.

Most of these people are on holiday. But then you have the other crowd: the full timers. And these are really interesting. The most recognisable subset is the ageing hippies. Their boat will be decorated with some Roger Dean-style purples and greens that make it look like the cover of a prog rock album. The unmistakably sweet smell of weed will waft from the boat’s innards, along with the squeals of Electric Ladyland. It’s a laughable cliché, but you barely remark on it after a day or two.

***

Of more interest are the other main breed of full time dwellers. They’re constantly on the move: many of them will only be allowed to stay in one spot for 14 days, unless they have permission from the local authority. They’re hard to pin down in other ways. They look rather like the middle class retirees, but they’ve turned feral. The beautifully-kept roof garden will be replaced by piles of firewood and fuel drums. Scruffy, basic clothes will be clustered on a miniature washing horse nearby. They look rather more bedraggled than their hippy counterparts.

And in a way, they’re more interesting than the genuine mysteries we glimpse on the water - the shady looking guys who look like old school crooks; the man we glimpse through his window surrounded by dozens of laptops and hard drives, whom we can only imagine is something to do with GCHQ; the narrow boat that’s been designed to look like a naval warship - those are mysteries that have a rational solution, of some kind.

No: for these relatively normal couples, the mystery is more human. They really have left society behind: for many long stretches the canal runs along the bottom of fields and is barely accessible to the public on foot, let alone by car. At what point did they say to themselves: this is it? Rare visits to any kind of shop that isn’t a post office store or located in the back of a pub, no neighbours, minimal water and electricity – it’s as basic an existence as one could choose, one chosen by an estimated 50,000 people in Britain, and entirely unnoticed by the rest of the country. Theirs is a quieter, gentler existence, utterly detached from the clamour of modern life.

And that’s why there’s this enforced formality and it’s why all these subcultures interact just fine on the occasions they run into each other: the deeply conservative retirees, the hippies, the full timers – not to mention us – because they all have one thing in common. Something about society has repulsed them – if in our case only momentarily – and they want escape. They may not see eye-to-eye on anything else, but they do on that, and it’s enough.

At the village of Braunston we’re confronted with the only choice of direction we will have all journey. The junction is the meeting point of two main arteries - the Grand Union, which runs towards Birmingham, and the canal we’re on, heading south to Oxford. Two hundred years ago this would have been a bustling intersection, with a steady flow of steamers and horse drawn boats. Today it’s an unremarkable little village, though it still boasts a crowded marina and a few boat building yards. It’s the busiest place we’ll see until we return to Rugby.

Four hours further on, and the canal snakes round to the left, around the base of Napton Hill. It’s a stunning sight. A view is no more than a perspective; but ours is unique. The emerald mound looms high, dappled with sunflowers and, perched on its crest, we can just make out a recently-restored windmill. We roll around its circumference, and moor up. The low sun sears the sky blood red as it dips below the horizon. We prepare a barbeque as a chill begins to gather in the evening air and the stars blink into life. This journey is all about tomorrow.

We rise early, and hurry through Napton’s locks. After a couple of hours we’re through: we’ve reached the canal’s summit. For eleven miles now, we’ll drift through the last ebbs of the morning mist, first past fields and flocks of sheep, then heavy vegetation punctuated only by red brick footbridges. Every hour or so a boat might pass; otherwise, we won’t see another soul. We see every blossom and field in high definition, yet the progress will be so slow and the sights so unrelentingly rural that the gradual changes in the scenery barely register. It's with a sudden, tender shock that you realise a line of foliage has been supplanted by a never ending horizon of fields. There are no historical shadows, no potential pubs or shops at which to stop. Our phones have been switched off since the day began: an unspoken rule. Anything could have happened in the outside world. There is silence.

We’re alone, together. In response, my mind conjures a buzz of static: the words in a break up letter (“That’s the paradox, of course: the pain hurts; the anaesthetic more so. One by one, each of those little curios disappears from my mind. What did we do together on your birthday last year? I know we did something good, I’m sure of it, but what was it again? Every day, a little bit more of the picture disappears forever. And here I am like some put-upon tenant when the bailiffs come round: please, let me keep this one, let me keep that one.”), then somehow the chord progression in an old song (A minor goes to C goes to D goes to F7 goes back to Ami and then it’s C then E7 or Ami to E and back, or is it…), and now it’s the flight of a cricket ball with leg spin applied to it and…

And suddenly the chattering fades. My mind slows to a crawl. There is nothing but the imperative to drift ever onwards, past sights unseen, around the same curve, again and again. It's a calm I won't experience again all year. I came here for nothing.

This post is part of A to B, the New Statesman's week of pieces on travel and transport.

A dog, a boat, a canal. Photograph: Getty Images

Alan White's work has appeared in the Observer, Times, Private Eye, The National and the TLS. As John Heale, he is the author of One Blood: Inside Britain's Gang Culture.

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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?