Leave those kids alone

Criminalising young people is counterproductive and creates lifelong offenders. Rather, we need a co

Where was law and order in the 2010 election? During the campaign, there were arguments about civil liberties, identity cards and immigration control. But the election was the first in over 30 years in which law and order barely figured. This is even more striking given that 2010 will go down as a political turning point.

In 1979, the Conservative Party made law and order central to its drive for power, capturing significant numbers of core Labour voters. In 1997, New Labour reversed the trick, overtaking the Tories on the right and distancing itself from Old Labour's law-challenging radicalism. Most of New Labour's effort went on the first half of its populist slogan "Tough on crime; tough on the causes of crime". Perhaps 2010 will signal a welcome cooling of the law-and-order party-political arms race.

No serious analyst of law-and-order policies believes that either the welter of new legislation that has afflicted our criminal justice system or the locking up of increasing numbers of offenders has made us safer in our beds at night. There is general agreement that the time has come to roll back our heavy use of criminal justice interventions and stop talking up the potency of criminal law to solve our social ills.

On 30 March, just over a month before polling day, Iain Duncan Smith argued in a speech at the Attlee Foundation in London that we could not "arrest our way out of our problems". At the same event, by contrast, Chris Grayling promised "robust policing", but he was not heard
of for the rest of the campaign. Grayling may not get it, but most politicians now do. They privately agree with the Treasury that a grave
financial crisis should not go to waste.

The major cuts in public spending in the policy pipeline provide an opportunity for us to stop doing a few things we should never have done - chief among them criminalising and locking up so many children and young people, thereby grooming a new generation of long-term adult criminals from whose depredations we will all suffer.

The trend is clear. Even though the volume of crimes, including those for which young people are responsible, has fallen since the mid-1990s, by 2007 there were more than twice as many children in custody as at the beginning of the 1990s. The increase is not explained by a corresponding rise in serious crime by children. Events such as the murder of James Bulger in February 1993 or the torture of two boys in Edlington, South Yorkshire, in April 2009, are thankfully rare. In that sense, Britain is no more broken today than it was 20 years ago.

Paying the price

Nor should we get hung up about offensive, antisocial behaviour committed by young people. That may have got worse, but no one seriously believes that the problem is best solved by putting already disaffected and typically disadvantaged youths behind bars. At roughly £100,000 a year, this costs more than three times as much as sending a child to Eton, and the outcome is not an enhanced prospect of becoming prime minister, but typically a lifelong relationship with the revolving door of Pentonville. As the former Conservative home secretary David Waddington confessed, it is an expensive way of making bad people worse.

So, how to save taxpayers money and better protect us from being victimised? It is a good first step that the plan to build a 360-bed young offender institution (YOI) outside Leicester has been scrapped. The proposal was undesirable and unnecessary. The youth custody population of England and Wales has fallen in the past two years from 3,000 to roughly 2,200. The surplus capacity this creates should allow the Youth Justice Board, which commissions custodial places for under-18s, to avoid unsuitable establishments. Indeed, it should be thinking about a completely different residential model.

The new government should now also do the following. First, a new agency should be created, separate from the prison service, to manage all accommodation for young offenders - the local authority secure homes, the commercially run secure training centres and the YOIs. This would make for coherent national planning, which is at present lacking.

This new agency should consider piloting a community-oriented institution along the lines of the proposed Young Offender Academy investigated over the past three years by a working party with the Foyer Federation, the support agency for youngsters making the transition to adulthood. We must keep the secure homes for younger children provided by local authorities. They are expensive, but they provide the sort of one-to-one care needed by children who have done dreadful things but are often both neglected and disturbed. In addition, we must explore an alternative model to the big YOI, an outmoded tool that should have been consigned to the penal dustbin.

Most of the cost of youth custody should be transferred from central government to the local authorities from which the young people come. This proposition has been pondered indecisively in Whitehall for several years. It must now be done. It would be the best way to give an incentive to the local authorities to invest in crime-preventive community programmes (research shows that confidence in these programmes is critical in persuading sentencers to avoid the use of custody). If this happened, a question mark would hang over the continued need for the Youth Justice Board.

The thousands of young people locked up each year spend, on average, 14 weeks in custody. It is wrong that a high proportion of them are held far from home, and unsurprising that the overwhelming majority are reconvicted within 12 months of getting out. Preventing youth crime involves determining responsibility and fixing consequences. But it also involves promoting positive, law-abiding opportunities and working with families as well as individual offenders - not further dislocating already fragile relationships. None of these processes is best achieved by transporting teenage offenders to large, distant, prison-like institutions.

Too much too soon

Finally, the conviction on 24 May of two boys aged ten and 11 on a charge of attempted rape of an eight-year-old girl should lead the government to reconsider the age of criminal responsibility. It is not in the interests of any child, either victim or offender, or society at large, that children as young as this undergo adversarial criminal justice proceedings. Such matters are, if necessary, better dealt with by the family courts and childcare proceedings.

Law-and-order services, which cost just under 6 per cent of overall public expenditure, are not going to be among the heaviest hit in the period 2011-2014. Policing, which claims the largest share of the pot, is too politically sensitive for that. But things are nonetheless going to be tough for front-line practitioners. There will be significant cuts. This makes it imperative that we shift the centre of expenditure gravity from that which is totemic to something that has a prospect of working

Rod Morgan was chairman of the Youth Justice Board from 2004-2007

Crime and punishment

Levels of youth crime have decreased overall since the early 1990s. However, during this time, there has been an increased use of custodial sentences for children and young people. In 1999, Home Office figures showed that while the level of detected youth crime had fallen by 16 per cent since 1992, custodial sentencing had more than doubled.

Tony Blair's establishment of the Youth Justice Board in 2000 continued this trend. While the government was keen to trumpet the success of its reform, a report by the Centre for Crime and Justice Studies said that youth offending had barely changed, but more children had been criminalised or imprisoned. It is a vicious cycle: the same report found that reoffending rates were highest among those who had had a custodial sentence.

Recent years have brought a sharp decline in youth crime: a 10.2 per cent drop between 2005 and 2008. However, this figure fails to take account of more than 19,000 children and young people issued with penalty notices for disorder or antisocial behaviour orders. If such children were included, the 10.2 per cent drop would be nearly eliminated.

This points to a problem in the statistical analysis of youth crime, which is the changing definition of what constitutes a crime, and how harshly it is punished. Crime levels may be unchanged, but criminalisation is rising.

Samira Shackle

This article first appeared in the 21 June 2010 issue of the New Statesman, The age of ideas

MILES COLE
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The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

***

The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

***

In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt