Will Britain have a black prime minister? Don't bet against it

A bigger barrier today than the remaining levels of prejudice of the electorate is an exaggeration of the prejudice of the electorate by the media and political classes.

“I don’t think there will ever be a woman Prime Minister in my lifetime”, education secretary Margaret Thatcher said in 1973. She was the only woman in Ted Heath’s Cabinet then, so the prognosis looked more like sensible scepticism than false modesty. There are good reasons to hope that Doreen Lawrence’s doubts that she will ever see a black Prime Minister might also be overtaken by events.

If anyone has grounds for scepticism until promises of progress turn into solid outcomes, it is Doreen Lawrence. Today, she leads a memorial service for her son Stephen, twenty years after he was stabbed and killed, for having the wrong colour skin as he looked for a bus home. That crime came to shock Britain, eventually, though it took four years for the failure to catch his murderers to become the stuff of national headlines and then a public inquiry. This anniversary is rightly being used to scrutinise whether the momentum behind high-profile commitments to change when the inquiry reported in 1999 has stalled since.

In politics, there has been a sharp acceleration of progress since the 1990s on breaking down barriers to fair chances. Britain had non-white MPs in the nineteenth century, but the modern story begins with the breakthrough of the class of 1987, with Bernie Grant and Dianne Abbott, Paul Boateng and Keith Vaz entering the Commons. There was only glacially slow progress for another generation. There were five non-white MPs when Stephen Lawrence was killed in 1993, and only four (2 per cent) of the 183 new Labour MPs elected in the 1997 landslide were not white. It took five general elections to see the number of MPs from minority backgrounds creep up from four to fifteen MPs. The doubling to 28 non-white MPs in the 2010 election marked a step-change, reflecting two things. Labour now selects non-white candidates in about one in ten new selections, giving a broadly proportionate overall share of the new intake. 

Crucially, the emergence of a new cohort of ethnic minority Conservatives breaks the dangerous pattern of one party having a near monopoly of minority representation, which would risk making the diversity of a national parliament highly vulnerable to the swing of a partisan political pendulum. So it is especially important that the 28 non-white MPs today cross party lines – with 15 Labour MPs and 13 Conservatives. (The Liberal Democrats remain stalled on the starting line, continuing to select minority candidates in highly diverse constituencies where the Lib Dems have little change, while the Conservatives in 2010 managed to break with an ‘ethnic candidates for ethnic voters’ approach).

Will anybody make it to the very top? British Future’s new report finds that 13 per cent of people say they would be uncomfortable with a Prime Minister of a different ethnicity to themselves, and 7 per cent that they would be strongly opposed to this. The national leadership role of Prime Minister now has mildly higher levels of discomfort than any other cross-racial interaction – 6 per cent would be uncomfortable about a next door neighbour; while their own children marrying across ethnic lines would have worried 44 per cent of people in the 1990s but makes only 9 per cent anxious in 2013.

These levels of discomfort are not negligible. But they have now fallen too low to significantly impact a real general election. Those voters who don’t know how they would feel about a hypothetical black Prime Minister would, in reality, vote on their views of the government’s performance, their trust in the major political parties, the economic record, and the perceived leadership skills of the actual individuals leading their parties. Even among the racially prejudiced minority, many will do the same. There will doubtless have been a section of pretty strongly chauvinist Conservative voters in 1979 who would not have chosen a woman leader if asked, yet who will not switched to re-elect Jim Callaghan because of it. (Some may even have come to change their minds about women in roles of leadership afterwards).

A potentially bigger barrier today than the remaining levels of prejudice of the electorate is an exaggeration of the prejudice of the electorate by the anti-prejudice media and political classes.

To get to be President, Barack Obama had to persuade his party that it was not a self-harming risk to let him run as the Democrat candidate for President. Indeed, the tangible fact of Obama's own Presidential campaign itself helped to increase the numbers of Americans who thought America was ready for a black President from 62 per cent in 2006 up to 76 per cent during the 2008 primary season, though black Americans remained more sceptical than whites until it happened. But were still a great many pieces, up until the month of the election itself, worrying about whether the US could ever elect a black President, citing the so-called “Bradley effect” of covert prejudice meaning that a candidate would under-perform the polls, though academics had long tried to point out was no longer supported by the evidence, but had become a "pernicious myth" which could itself be a barrier to fair chances.

A similar problem set back progress at a local candidate level in Britain in the 1990s. Newspapers still habitually retail the mythology that a black candidate lost the “safe Tory seat” of Cheltenham in 1992 because of race. It isn’t true – the swing in the marginal seat was identical to that in Gloucester and Bath. A white barrister from Birmingham would surely have lost the seat, just as John Taylor, the black barrister from Birmingham did. But the myth was damaging. As Shamit Saggar has pointed out, this led to an “imputed racism” effect, where selectors stress that “they do not discriminate against black and Asian but that they fear that voters will discriminate on that basis, and so selectors play safe and shy away from adopting black and Asian candidates”.

The Cheltenham myth lost some of its power when Gloucester elected Parmjit Dhanda in a marginal seat in 1997, allowing him to prove wrong the local newspaper’s claims that the area was not ready to elect a ‘foreigner’ . It was routinely disproved in the 2010 election. While the class of 2010 did not yet make Parliament representative of modern Britain, but the step-change in progress should help to finally make non-white politicians a normal feature of our public life, not an exotic fringe feature, even if that remains a little lost on headline-writers, in their excitement at finding a “British Obama” or “black Boris”.

Finally, there is the intriguing possibility that a political party could actively benefit at the ballot box from a non-white leader. Electoral geography means this is unlikely to apply to a social democratic or centre-left party. But it could yet be the case for the Conservatives, who won 16 per cent of the non-white vote, compared to 36 per cent of the white vote. The party now faces what influential backbencher Gavin Barwell has called an “existential challenge” in coming to terms with Britain’s growing diversity. The US Republican failure with Hispanic voters is concentrating minds too.

Overcoming historic perceptions of the party among non-white voters will, of course, be a task for any Conservative leader, and party strategists are studying Lord Ashcroft’s detailed analysis of the challenge. There is no need to see a non-white leader as necessarily the key to overcoming this - and the party can not wait to elect a minority leader to make progress since increasing its share of minority votes is essential to any future majority strategy in 2015 or beyond.

However, in age of personality politics, a non-white Tory leader would doubtless be one way to send a message about the party’s commitment to meritocracy and inclusion. After all, it was no coincidence that the Conservatives after Sir Alec Douglas-Home strongly preferred over the next forty years to choose leaders with the non-privileged social backgrounds of Ted Heath, Margaret Thatcher, John Major or William Hague rather than those like Douglas Hurd, who went to a leading private school. (Though David Cameron and Boris Johnson showed that Etonians can break this new glass ceiling for those who did go to the poshest schools!).

For similar reasons, if a well qualified black or Asian leader who could speak the language of the Tory tribe were to emerge in a future leadership contest as the best candidate, they would very likely be more of an asset than a liability for the party’s broader electoral chances.

The shifting make-up of the political class means that there will almost certainly be a non-white Chancellor, Foreign Secretary or Home Secretary in the next decade, creating a flurry of excitement about a ‘first’, before people go on to praise or barrack them over their performance in the role.

A Prime Minister too? Nobody could confidently predict when it will happen. If somebody is good enough, there is no electoral reason why not on the basis of race. And remember that the Conservatives did not make Benjamin Disraeli or Margaret Thatcher leader to break glass ceilings. They acted in their electoral self-interest to choose the candidate most likely to win them new votes, even if they did not fit the traditional mould. Don’t bet against it happening again.

Barack Obama greets the media as he and David Cameron pose for pictures outside 10 Downing Street in London, on May 24, 2011. Photograph: Getty Images.

Sunder Katwala is director of British Future and former general secretary of the Fabian Society.

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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?