The press is throwing a toddler's tantrum over Leveson

Much of the press seems to be belly-down on the supermarket floor, punching the linoleum, kicking out and screaming WAAH WAAH BUT I DON’T WANT TO BE REGULATED. Here are ten truths the media needs to hear.

Recently I read some advice on dealing with a toddler’s tantrum. Try to ignore it, was the suggestion, by walking into another room. If ignoring doesn’t work, say something like “Time to stop now – I’ll count to 10”.

Much of the press seems to be belly-down on the supermarket floor, punching the linoleum, kicking out and screaming WAAH WAAH BUT I DON’T WANT TO BE REGULATED. Ignoring hasn’t worked, so . . .

ONE – The lack of self-reflection is truly staggering. The Leveson process is not something which was done to us. Nobody woke up one morning and thought “I know what I’ll do today – curtail the freedom of the press.” This is something entirely caused by the industry being, on the whole, out of control; engaging in occasionally illegal and often unethical practices. Take responsibility.

TWO – We had several chances at self-regulation which was not independently assessed and externally supervised. We made a complete arse of it. To ask for yet another round of the same sounds like an abusive alcoholic promising never to beat their spouse again, bathed in the light of the X-rays of their partner's latest fractures. The credibility, goodwill and trust necessary for self-regulation to work are just not there.

THREE – Attacking the individuals involved in the Hacked Off campaign with ad hominem and below-the-belt articles, only serves to prove the point that regulation is necessary now as much as ever. It is like waiting round the back of the school to beat up the kid who reported you for bullying. Publishing articles illustrated with Hugh Grant photoshopped to look like a pig only serves to make journalists look stupid and petty. Not to mention that, annoyingly, Grant makes the whole porky thing work and is still pretty sexy as a pig-man.

For comparison, here is a pig with the nose of Hugh Grant.

FOUR – Regulation of professional standards is part of modern life. Embrace it. Every profession on the eve of regulation has warned that it will be destroyed be it. None, that I can think of, has. Many have been reputationally enhanced. We keep complaining that we are crowded out by social media and blogs. A system of kitemarking quality, standards and ethics could be the unique selling point the industry desperately needs.

FIVE – Publications owned by Murdoch, the Barclay brothers and Lord Rothermere complaining that the Hacked Off campaign has secretly lobbied politicians is off the irony scale. Hacked Off’s agenda is completely public. They are saying what they have been saying all along, to anyone willing to listen. To claim that this somehow is tantamount to, for instance - a secret and unminuted tea date or dinner party with the Prime Minister on the eve of launching a huge takeover bid - is ridiculous.

SIX – If you wish to preserve your independence, you could start by demonstrating it. For example, you could do a hard-hitting piece investigating how and why David Cameron has arrived at his current position after promising to implement the Leveson proposals in full, unless they were “bonkers”. By not taking up the opportunity – because it is against the industry’s interests – and toeing the editorial line, you demonstrate the opposite of independence.

SEVEN – Prove your talent for factual and balanced reporting with factual and balanced reporting. Calling what is proposed “statutory regulation”, when you know it is not and everyone knows it is not and everyone knows that you know it is not, does not do you any favours. Stop claiming the world will cave in if this is allowed. Nobody believes it.

EIGHT – Listen to your professional union. "It is hugely ironic that those owners and editors who vehemently opposed Leveson's recommendations for an independent regulatory system, have so lost perspective in the collective hysteria that has gripped them in recent months, that they've colluded in a Royal Charter fudge that could risk opening the door to future political meddling in our press.”

NINE – Understand change. Invariably the players who do best in a situation where change is necessary are the ones who accept it the earliest and get involved in contributing to how it might best come about. Heckling and sulking is the worst possible strategy in a climate where public opinion is overwhelmingly – and rightly – in favour of change.

TEN – Most importantly, please stop suggesting that campaigners, by allegedly bullying politicians, have “become what they despised”. First, this involves an admission that the industry does bully politicians.

Second, you may intend to aim the slur at Hugh Grant, but the buckshot hits people like the Dowlers and the McCanns and Chris Jefferies – and they have suffered enough in this industry’s hands.

Campaigning for a piece of legislation is not the same as taking long-lens shots of families in grief at a funeral. It is not the same as naming an innocent person as a murderer based on no evidence. It is not the same as accusing the parents of a kidnapped girl of killing her; getting a paediatrician's home spray-painted with the word "paedo" after the Name and Shame campaign. It is not the same as hiding a note in a five-year-old’s schoolbag to browbeat her novelist mother into giving an interview. It is not the same as hacking a dead girl’s phone. This is the behaviour that has brought us to this point – not campaigners. Our behaviour.

Time to stop now.

Hugh Grant: more attractive without the pig snout, but only just. Photo: Getty

Greek-born, Alex Andreou has a background in law and economics. He runs the Sturdy Beggars Theatre Company and blogs here You can find him on twitter @sturdyalex

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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?