It is definitely, definitely not the case that the teams in La Liga are better. Photo: David Ramos/Getty Images
Show Hide image

Why are we messing up at top-flight football? I have all the answers

Champion of Europe? Not these days. Hunter Davies explains some of the reasons England aren't quite the footballing force they once were.

Why are we so bad? At this time of the year, England used to have four teams left in the quarter-finals of the Euro championship, two or three at the semis stage, sometimes an all-England final. This year: nothing, nada, disparu. Our four world-class Premiership clubs are long goners. The great brains of the football world have been wrestling with this most vexatious question, muttering into their fashionable beards that it’s a big ask, but now we have some answers...

We are not bad. It’s just that we are in the presence of greatness. Living at this time are some players of genius, so bow down before Messi, let us praise Ronaldo and let’s be grateful that our rough, simple lads get to play on the same turf, even if they spend most of the game lying down, the ball having passed through their legs, again. For last Sunday’s Clásico between Real Madrid and Barça, I stood during the whole game. Respect.

The pendulum will swing. It can’t go on like this. These bad spells never last long. Look at the England national team – why, it was only yesterday they won the World Cup, hold on, correction, 49 years, OK, forget England: that particular pendulum has somehow got stuck on the marker saying “Shite”, so we’ll move on...

Too many bloomin’ foreigners everywhere. They come over here, take all our street-sweeping jobs, provide brilliant service in Pret a Manger and sleep with all our English girls, so how can our lads get in any of our Prem teams? Have you noticed how they arrive in the Prem with big reputations, come to save us, show us how, yet the moment they put on the shirts of Man United, Man City or Spurs, they prove to be rubbish? A plot, obviously. “Are you a double agent in disguise?” they now sing on the Shelf at White Hart Lane.

Too well paid. How can they concentrate when they’re worrying about their HSBC account in Jersey, their five gardeners, three brand managers, two lawyers, two accountants and three French hens bought for tax reasons?

Not paid well enough. They’re being really horrid to Raheem Sterling at present, refusing him £150k a week. Liverpool are just so mean, just because he’s young and inexperienced. Why, it’s ages since he was in short trousers. How can he do his best if he’s worrying about where his next Bentley is coming from?

And the next haircut. People go on about rugby players not needing to bother, but come on, they look pathetic, bits all over the shop. Our footballers do have standards. Having that sharp parting made fashionable by Giroud is not easy. Fans don’t realise it takes surgery to get the line right. And a quiff at the front, or plastered up in the air, as the players do at Newcastle. You need a cool cut to hold your head up in a Prem dressing room.

Surrounding the ref. They also go on about rugger players never arguing with the ref. How craven is that? Far better to have a co-ordinated verbal assault on the ref, all the players going blue in the face. Takes ages in training, which is why they have little time for working on all that soppy stuff they do in Europe, such as passing the ball.

Easier in Europe. Oh yes, it is. Bayern Munich, 10 points ahead in Germany, often field only five players, sometimes just the wives of the first team, and still they hammer everyone. In Spain, Real Madrid and Barça are level pegging, but down at the bottom, dear me, it’s like a Sunday league, or playing Carlisle United. In our wonderful Prem, richest, most competitive in the world, it’s war every week.

The general election. Our lads have been distracted all season, worrying about the result. Once that’s over, you’ll see.

England are ahead of the game. In everything, being an advanced civilisation. Did we not have the Industrial Revolution first, and suffer the consequences first? Did we not give cricket, rugby and football to the world, then politely stand back while others did them better? See, we are the winners, really. Calm down...

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 27 March 2015 issue of the New Statesman, Easter Double 2015

Getty
Show Hide image

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?