The decision to allow same-sex marriages in church will be a headache for Justin Welby

It may end up dominating the new Archbishop of Canterbury's tenure in the way that the women bishops debate has dominated Rowan Williams'.

As if he didn't have enough on his in-tray trying to sort out the mess over women bishops, the government's decision to permit same-sex marriage in church will create more problems for the incoming Archbishop of Canterbury, Justin Welby.

When his appointment was announced, Welby was widely described as being a "staunch" opponent of same-sex marriage. But he has never used the language of, say, the Archbishop of York John Sentamu, who once claimed that to allow gay couples to get married would be to "torture the English language."  Instead, during his first press conference Welby promised to "listen very attentively to the LGBT communities and examine my own thinking prayerfully." But however his own thinking evolves, the change will inevitably call into question both the unity of the Church of England and its relationship with wider society. 

As the women's bishops debate also showed, the church can't afford to get too out of step with the nation from which it takes its name.  When it does, it raises awkward questions about its constitutional status and privileges, even about what it is for. 

The Church's official position, as set out in its response to the government's consultation earlier this year, is to oppose any move towards equalisation marriage between gay and straight couples.  Even the government's initial proposals, which would have prohibited any same-sex ceremonies in religious premises, went too far for the Anglican leadership. The document claimed that the change would "alter the intrinsic nature of marriage as the union of a man and a woman, as enshrined in human institutions throughout history." 

It also made legal arguments, casting doubt on the government's distinction between religious and civil marriage and stressing the historic obligation of the Anglican priests to marry couples resident in their parish, whether they were members of the church or not.  However, the Church of England has long had an exemption when it comes to marrying divorcees, and recently acquired one in respect of transsexuals, so there's no obvious reason why it shouldn't also have an exemption from being required to perform same-sex marriages.

The real problem for the established church - and for the new archbishop - will be internal rather than external.  Instead of vicars being forced by the state to perform gay marriages against their conscience, a more likely scenario will see clergy banned by the church from following their conscience by performing them. The official statement was not universally welcomed by Anglicans.  Many, in fact, denounced it.  The liberal grouping Inclusive Church put in its own submission, describing the ability of churches to offer same-sex ceremonies "a fundamental principle of religious liberty."  It was "of the utmost importance that objections to the principle of same-sex marriages by some religious groups should not be used as an excuse to obstruct other groups from acting in accordance with their own religious views."  Giles Fraser, perhaps the Church's highest-profile liberal, declared that he was "spitting blood" after reading the "ridiculous" official response, which he thought had "all the democratic authority of a  Putin election victory."

Such views probably still represent a minority view among practising Anglicans, in contrast to the push for women bishops - which, despite the disappointing outcome of the recent Synod vote, has clear majority support inside the church.  And as that vote showed, it's quite easy for opponents of change to put together a blocking minority in the Synod.  So it's hard to see a proposal to permit same-sex marriage winning the necessary two-thirds majority in all three houses.  It's very likely that religious organisations will be allowed to offer same-sex weddings on the same terms that they can already offer civil partnerships: that is, only if the group as a whole decides to accept it.  Individual priests will not be able to make the decision unilaterally. 

The Church of England officially supports civil partnerships but, unlike some other religious groups including the Quakers and the United Reformed Church, has made no move to permit the ceremonies in its churches.  Once same sex marriage becomes widely accepted, as it surely will once the doom-laden predictions of its opponents prove unfounded, this is likely to change.  There will be increasingly vocal calls from liberal clergy to marry same sex couples.  In Denmark, the national Lutheran Church already performs same sex weddings, with exemptions for individual ministers who have an objection. Such a solution could also work in the Church of England.  But not before another almighty row between the C of E's liberals and conservatives. It may end up dominating Justin Welby's tenure as archbishop in the way that the women bishops debate has dominated Rowan Williams'.  

Justin Welby. Photo: Getty
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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?