Why Labour should make the case against Trident renewal

Spending £30-100bn on a new nuclear weapons system should be unthinkable when frontline forces are enduring dramatic cuts.

A short while ago, the 50th anniversary of an event so profound it almost wiped humanity from the face of the planet passed us by – with little media interest. 22 October, 1962 – the Cuban Missile Crisis.

Sat on a ringside seat for humanity's brush with oblivion was Robert McNamara – US secretary of state for war. McNamara oversaw much of the Vietnam war and the build-up of US nuclear capability at the height of the cold war. And yet in 2004, he declared: "The indefinite combination of human fallibility with nuclear weapons leads to human destruction. The only way to eliminate the risk is to eliminate nuclear weapons."

He developed what became known as "McNamara’s Dictum": 1. nuclear weapons make nuclear war possible; 2. human fallibility means that a nuclear exchange is ultimately inevitable; 3. a major nuclear war has the capacity to destroy civilisation and threaten the survival of the human race.

In all likelihood the UK’s current independent nuclear deterrent could, on its own, achieve point 3. Each Trident warhead, of which there are 40 per submarine, is estimated to be able to kill over 1 million people outright. The vast majority of those killed would be civilians. Countless more would subsequently die from secondary radiation exposure. All of this possible at the mere push of a button or, as McNamara feared, as the result of simple human error or a technical glitch.

If a rational debate on Trident were ever held in the Labour Party, the inevitability of McNamara’s dictum alone should be enough to end our party’s dalliance with nuclear weapons. Common sense and a Darwinian instinct for survival should ensure that.

But it’s a mistaken clamour for political survival not humanity’s survival that motivates the proponents of nuclear weapons within the Labour Party. Elements cling to nuclear weapons like a religious mantra. To even question the need for one is akin to blasphemy of the highest order and would supposedly presage the re-authoring of another lengthy political suicide note. But scaremonger as they will, the cold weight of logic, military reality, economic necessity, political pragmatism and moral rectitude means the terms of debate have shifted out of their favour.

In a recent exchange in the House of Commons, one of Labour’s shadow defence team trotted out the same old tired mantra: "In a security landscape of few guarantees, our independent nuclear deterrent provides us with the ultimate insurance policy, strengthens our national security and increases our ability to achieve long-term security aims."

On the surface it sounds like an authoritative and credible position. But dig a little deeper and its vacuous nature becomes apparent – namely that an almost unimaginable destructive capability can actually defend us.

To describe "Mutually Assured Destruction" as an "insurance policy" would be comical if it wasn’t such an appalling concept. Nuclear weapons "strengthen our national security"? In the past 30 years, often with national interest or security being cited, the UK has been involved in a number of overseas conflicts but the use of Trident has never seriously been considered.

The one consistent factor throughout all these conflicts was under-equipped conventional forces. In today's current financial climate, with demands being made on the MoD to cut spending, forking out anywhere between £30-100bn for Trident replacement is unthinkable in terms of the cuts our frontline forces will have to endure. 21st century Britain will become an increasingly toothless tiger that can do little more than posture with its finger over a button it will never use. Our forces deserve better. The country deserves better.

Do nuclear weapons "increase our ability to achieve long-term global security aims"? Since the 1980s, non-nuclear armed Germany and Japan, not nuclear armed Britain and France, have had more clout with Washington. Political status does not necessarily depend on nuclear capability. Increasingly, nuclear weapons are a fig leaf for our political poverty on the international stage. What both Germany and Japan did possess was economic clout.

No doubt relinquishing our nuclear arsenal would irritate Washington but what would the US rather have, the UK able to assist in military operations or an ill-equipped conventional force and a nuclear arsenal which will never come into play?

Ultimately, any decision the Labour Party makes must not only factor in political considerations but military ones too. Understandably, the electorate places great faith in the professional soldiers and strategists that run our military. So, when some of the country’s most senior former officers – Field Marshall Lord Bramall, General Lord Ramsbotham, General Sir Hugh Beach, Major General Patrick Cordingley and Sir Richard Dannatt – express "deep concern" that Trident was excluded from the 2010 Strategic Defence Review, we should pay attention. In fact they went further saying there was: "…growing consensus that rapid cuts in nuclear forces…is the way to achieve international security."

These men are not doves. They are hard-headed strategists who understand many of the military realities we face as a nation. They have provided an opportunity the Labour Party must not miss.

It is rare in politics that logic, morality, economic sense, political pragmatism and, in this case, military reality converge. And yet, clearly, on the issue of nuclear disarmament they have. Party policy must change on this matter if we are to have any hope of fulfilling our core desire for a better, fairer, safer world.

HMS Vanguard sits in dock at Faslane Submarine base on the river Clyde. Photograph: Getty Images.

Clive Lewis is the MP for Norwich South and an Opposition frontbencher. 

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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?