Why you haven't heard of the five most important (only) pro-European movements

They punch… well, they pretty much punch their weight.

I’m pro-European. I very much want to make that clear. 

I don't just mean in this article: it's something I increasingly want to make clear all the time. When I'm talking about politics; when I'm discussing my holidays; when someone tells me it's my round – whatever the topic, I find myself compelled to tell people that, I know it's flawed, I know it's imperfect, but yes, I remain committed to the rather unlovely continental bureaucracy hanging around at the far end of the Eurostar. 

The reason I'm beset by this urge to tell all and sundry that I'm pro-European is simple: no one else seems to share it. You can't throw a stone in Westminster without hitting a dozen people who'll lecture you on the Norwegian model or the fact the European Parliament costs us a million zillion quid per day. But vocally pro-Europeans – those willing to say, out loud, that there might be benefits in not pissing off our neighbours and abandoning the world's largest free trade zone – are in distinctly short-supply. 

1. Britain in Europe

Twas not always thus: 1999 saw the launch of the non-partisan Britain in Europe (BE) campaign, intended to improve Brussels' image in the UK. Its supporters included such big hitters as Tony Blair, Kenneth Clarke and Charles Kennedy; its head of communications was one Danny Alexander. 

BE's initial purpose was to make the case for the single currency. But that, it swiftly became clear, was a non-starter, so after a couple of years it instead moved to focus on getting a 'Yes' vote in the referendum on the EU constitution. Once the French and the Dutch had killed that, BE wasn't fighting for anything in particular. So in 2005 it was wound up. Google 'Britain in Europe' now, and you'll find this site, which promises you the facts without bias, but also includes the disarming admission that "The factuality of the information is not guaranteed". This seems to sum up the entire debate.

2. European Movement UK

There are other groups purporting to speak for Europe, but all are so titchy as to be little more than flies buzzing round Farage's head. There’s the European Movement UK, which is part of a continent-wide pressure group and which calls, uniquely, for greater integration. It promises to brief journalists, correct mistakes and counter anti-European bias.

But if it's had any success in this job, it's keeping it quiet: most of what little press coverage it's received was concerned with the fact that Danny Alexander used to work there, too. Its Twitter followers number fewer than 1,500, which is diddly squat in social media terms, but those who do follow are in for treats such as stock images of Euro-fans, explaining what the EU means to them. For some its travel opportunities; for others, environmental cooperation. For Daniel and Christine and their baby Hector, meanwhile, it's the fact that "EU Judicial and policing co-operation helps fight international organised crime", which is quite an advanced political position for a toddler to articulate, I think you’ll agree.

3. Centre for European Reform

The other pro-European think tanks are not only small, they're also not that pro-European. The Centre for European Reform, for example (followers: 3261) writes comment pieces in the FT, the Guardian, and so on. But it positions itself as Atlanticist, facing Washington as much as Brussels, and while it says it "regards European integration as largely beneficial", it also recognises that "in many respects the Union does not work well". No help there, then.

4. Open Europe

More successful, but more tepid, is Open Europe. It's by far the best at making its voice heard, garnering frequent press coverage and a whopping 19,300 followers. It started life, vexingly, as the campaign against the 2004 European constitution. Today it claims to back Europe, and has the highly cosmopolitan staff roster to prove it – but true to its roots it wants a different Europe, one that emphasises free trade and the nation state.

It wants, in other words, a Europe that does the bits the British like, but none of the nonsense we don't. This might explain why its backers include such prominent right-wingers as Ruth Lea, Maurice Saatchi and Kirstie Allsop – and, as so often happens when the Tories talk about Europe, it ends up satisfying nobody. To the pro-Europeans Open Europe is just a cover for exiting via the back door ("insidious", Peter Mandelson calls it); while to the sceptics, a campaign for a Europe that isn't on offer amounts to little more than a promise of a free unicorn for every supporter.

5. British Influence

Last January, a cross party group of pro-Europeans (Mandelson, Clarke, Lord Rennard) decided it was finally time to resurrect BE to counter UKIP's lies. British Influence describes itself as "more than another think tank", and promises to be the "go to source for journalists and policy makers who want to hear a more balanced side of the debate". 

How successful it's been is difficult to judge – like all these think tanks, it’s cleverly chosen a name that's almost un-Googleable. Despite being four months old, its Twitter following is already twice the size of the European Movement's, and it did somehow persuade the Telegraph to run a pro-European comment piece written by Lord Mandelson. But the only person who seems to have treated it as any sort of a force is a writer at the right-wing website the Commentator, who angrily suggested that Clarke's involvement should be enough to get him sacked.

Two conclusions present themselves from all this. One is that those pro-European pressure groups that exist are entirely reactive. They're not making the case for Europe, they're just waiting for Nigel Farage to open his mouth so they can blurt out, "Isn't!" Perhaps the British press makes it hard to be otherwise, but there's little sense that anyone's even trying.

The other is how unenthused even our pro-Europeans are about Europe. This may be because it's hard to shout "Bureaucracy! Yay!" with a straight face, but nonetheless it has consequences. As it stands the Overton Window – the range of policies and views seen as acceptable to the public – clearly leans towards scepticism. The result has been that the Eurosceptics are out and proud, while the pro-lobby are nervous and cowering.

But this process is self-reinforcing. The more Eurosceptic the public seem, the more timid the pro-lobby has become, the less likely people are to hear their arguments – and the closer to the exit the mainstream of thought has moved.

The only way to change all this is for the pro lobby to be as loudly, cheerfully, brazenly pro-European as UKIP is Eurosceptic. They might not make many friends that way at first. They might not even feel like it. But the less we hear of the case for Europe, the harder it becomes to make. Someone should make it, before it's too late.

Danny Alexander, the star of our story. Photograph: Getty Images

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Brexit. You can find him on Twitter or Facebook.

Getty
Show Hide image

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?