Our parties must respond to the rise of Englishness

One of the lost stories of the census is the growth of an English identity. Mainstream politicians need to find ways of embracing this trend.

The main news stories that have been derived from the release of the census data have been about diversity, immigration and religion. But one other revealing and significant trend contained within it has not as yet been given its due.

For the first time in its history, the census allowed the inhabitants of England to indicate whether they considered themselves to be English as well as, or instead of, British.

And, the result? Some 70 per cent reported that they regard themselves as English, a finding that confirms IPPR polling earlier this year. Even more strikingly, only 29 per cent of English respondents indicated that they see themselves as British a figure that suggests a significant drop in affiliation for what was very recently the primary national preference of the English.

It would appear that the London-centric chatter sparked by the census about Britain’s cultural patchwork has missed a striking counter-trend -the increasingly widely shared desire to associate with Englishness, with the notable exception of London.

These census figures are in fact the latest of a growing number of indications that something very significant has been happening in terms of the national self-understanding of the English in the last two decades.

In recent years, this trend has been wished away by the mainstream political parties. But this can go on no longer. Instead, as I argue in the latest edition IPPR’s journal Juncture, they need to develop a more compelling, contemporary case for the Union which takes into account proper consideration of the nature and implications of developing forms of English identity.

While the main parties at Westminster still cling to the orthodoxies of British government forged in the eighteenth and nineteenth centuries, the new forms of English identity which are starting to loom into view bring with them major challenges to the core assumptions of this national story, not least the supposed disinclination of the English to develop their own sense of national identity.

This does not mean accepting the dramatic claim that we are living in a ‘moment’ of English nationalism.. A wide range of research finds very little evidence of a collective English desire to reclaim national sovereignty from the British state.  But there are signs that the idea of a new, more ‘delineated’ relationship between England and the UK is becoming increasingly attractive.

This suggests, in policy terms, the state providing greater recognition of the distinctive forms of nationhood that the English are developing. It also implies that a more concerted effort to reform the centralised and top-down model of state-led governance which is fraying the bonds between governors and governed in England, is overdue. The current system represents a major brake upon the prospect of renewing England’s cities as engines for economic growth and civic pride, as Lord Hesetline has most recently pointed out.

At the same time as Englishness has been kept at the margins of political debate and policy development, it is also the case that, thanks to devolution, British politics is becoming much more Anglicised in character. As soon as key areas of domestic legislation were devolved, the UK parliament began gradually to turn into a parliament for England, which reflects the priorities of English political culture above all.

But, important as it has been, devolution has not been the only, or even primary, factor altering existing patterns of national identification among the English. We need to appreciate the impact of a cocktail of deepening cultural anxiety, rising economic insecurity and growing disillusion with the political system that have made the organic and resonant language and symbols of Albion more appealing. Different strands of English identity re-emerged out of an extended bout of national soul-searching in the early and middle years of the 1990s, prior to devolution and prompted by the realisation that the pillars upon which familiar stories of the glory of Britain were fading fast.

This is not to suggest that the English have simply abandoned the institutions and emblems of the British state, giving up the Union Jack for the Cross of St George. As was clear during the summer, many of us are still responsive to the inclusive and progressive account of the Anglo-British story which Danny Boyle assembled during the opening ceremony of the Olympics.

Yet, we should not be fooled by this kind of one-off, orchestrated ‘ecstatic’ nationalism into ignoring the deeper-lying, slow-burning growth of a strengthening set of English identities. If these sentiments continue to remain unspoken within the mainstream party system, there is a greater chance that they will mutate into a harder-edged nationalism.. The dearth of meaningful forms of cultural and institutional recognition for English identity is bottling up emotions and ideas that need to be engaged and aired.

Letting England breathe a little, bringing decision-making and governance closer to its cities and towns, and re-engaging its people with the case for the Union, now offer the best available way of reinvigorating the United Kingdom as a whole.

A longer version of this piece appears in the latest edition of IPPR's journal Juncture.

Seventy per cent of residents in England regard themselves as English, not British. Photograph: Getty Images.

Michael Kenny is Professor of Politics at Queen Mary,  University of London, and an associate fellow at IPPR

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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?