After the new Lawrence scandal, the Met can't afford to come up empty this time

The long era of the cover-up has unravelled, for perhaps the last time. Transparency now is crucial to any credible effort to restore trust.

The most troubling aspect of Peter Francis’s allegations that his role as an undercover police officer included instructions to "find dirt" on the family and supporters of murdered teenager Stephen Lawrence is how much less shocking this news is than it should be.

The revelations in last night’s Dispatches programme, and a new book on undercover policing from Paul Lewis and Rob Evans, have led news bulletins and led to emergency statements in the House of Commons. If Francis’s allegation of a conscious decision to withhold the knowledge of the existence of the Special Demonstration Squad (SDS) involvement in the Lawrence case from a public inquiry is true, that would be the most indefensible of cover-ups. Yet this would also fit the pattern of earlier revelations, over the years, about this historic failure of policing.

The truth is that the Met Police has always remained deeply conflicted about the Lawrence case. Indeed, it is that long, defensive pattern of ambivalence over being called to account which helps to explain why, even two decades on, the force is embarking on yet another process to discover how deep its own failures went. The official line was that the force held its hands up, pledging to learn the lessons and bring about change, yet the Met often seemed to calculate how little it could escape with admitting. So former commissioner Sir Paul Condon apologised to the Lawrence family, part way through the Macpherson inquiry after the complacency of its earlier reviews of the case had been starkly exposed in cross-examination. He could admit that the family had been failed, but resisted any acknowledgement of what the inquiry called "institutional racism", though perhaps using that most emotive of terms rather than "discrimination" for the systemic racial disadvantage in outcomes made this harder. The Met pledged significant change after Macpherson and did make some serious attempts to make progress yet this ambivalence about the inquiry’s outcome also established a habit of challenging the recommendations as an impediment to effective policing, not a driver towards it. Given that the challenge was of cultural change, this set important limits on how deep it would go.

Duwayne Brooks was with Stephen Lawrence when he was killed. The Met acknowledged at the inquiry that they had never properly supported him as a victim of crime. This was not simply a sin of omission. Significant resources went into investigating a victim, while the murder inquiry went nowhere, except to be damaged by the additional pressure put on a vulnerable witness. Brooks’s own book Steve and Me, published in 2003, offers a jaw-dropping account of a gruelling campaign to destroy his reputation. He was later awarded damages from the Met. A proper inquiry into the SDS exercise might help to explain how this happened.

Brooks, now a Lewisham councillor, has shown impressive resilience to survive these successive ordeals. It is a sobering thought, yet it is almost certainly true, that had he been murdered and his friend Stephen survived, none of the events that were to change social, political and legal history would have happened. For even for a measure of justice to be done for Stephen Lawrence, it somehow had to be established, well beyond any reasonable doubt, that the teenager was the very archetype of a blameless victim; and that nothing could be pinned on his family or even the broader campaign in his support. Duwayne Brooks’s personal story, he had left home and was living in a hostel, may have failed to meet the excessively high threshold for a crime shocking enough for us all to care about the failure to solve it. The stark failures would have remained safely under the carpet.

The long failure to protect the vulnerable victims of sexual grooming shows the cost to justice paid when a focus on the credibility of victims can hand impunity to perpetrators.

The Lawrence family also faced several, ultimately unsuccessful, attempts to marginalise their own campaign. It took four years for Stephen Lawrence’s case to gain a sustained national profile. Many rightly consider Paul Dacre’s "Murderers" front-page of February 1997 as the Daily Mail’s finest hour. It was a crucial and transformative intervention, and was an important staging post to new Home Secretary Jack Straw’s decision to announce a public inquiry.

Things might have turned out very differently. The Mail’s very first report on the Lawrence case had been a more sceptical one, under the headline "How Race Militants Hijacked a Tragedy", in May 1993, the month after the murder. The report questioned the role of campaigners who had "brought in Nelson Mandela on the short path towards the making of a cause" and looked at how a march on the BNP headquarters in Welling had led to violence and rioting.

The Lawrence family worked closely with a range of trusted, anti-racist activists to promote the Justice for Stephen campaign. Yet the Lawrences also took care to avoid the type of support which could distract from or discredit their cause. They immediately condemned the violence in Welling as a dangerous distraction and, in its wake, formally wrote to warn particular groups, including Panther UK, who they feared were less interested in campaigning for justice than in using their son’s name and tragedy for their own ends. It could turn out that these efforts to protect the campaign’s purpose and integrity were a highly prudential way to frustrate the undercover effort.

Anybody who lived near Eltham in the 1990s will also know that there were significant BNP-inspired attempts to fuel a street counter-narrative of rumour and smear in the Eltham and Greenwich area for several years in the 1990s, a phenomenon explored in depth in Roger Hewitt’s excellent Cambridge University Press book White Backlash. Ranging from unfounded allegations that a black gang may have committed the murder to attempts to smear the victim’s character. It would be important to investigate that the undercover police dirt-digging exercise did not play any role in fanning this rumour mill.

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Policing has changed since the early 1990s but too slowly. There has been good work on engaging communities on tackling gun crime, yet disproportionate stop and search ratios have barely shifted. Richard Stone, an adviser to the Macpherson inquiry, pointed out in his recent book that efforts to diversify the Met leadership have stalled, with a fall in the number of potential non-white candidates reaching the rungs just below the apex. That story of gradual, and sometimes glacial advance is reflected in sensibly cautious public attitudes. Six out of ten people believe there was a deep-seated problem of racism in the Met when Stephen Lawrence was killed, with only 7 per cent disagreeing with that broad consensus. A similar proportion are hopeful that the response today would be quicker, fairer and less racist, but Londoners and non-white Britons are less likely to think so. Only one in three ethnic minority Britons believe that policing is generally fair.

The challenge to win confidence in policing is not only a question of race. British Future returned to Eltham this spring to hold a citizens' jury on the 20th anniversary of the Lawrence murder, bringing together 38-year-olds who were Stephen Lawrence's peers with 18-year-olds in the area today. This Eltham citizens’ jury agreed that race relations had improved considerably. It was possible to identify an "integration consensus" when that would not have been the case in the much more racially polarised mid-1990s.

The most contentious issue was policing - but this was now as much a question of age as race. Across ethnic and class backgrounds, the 18-year-olds had a shared experience of mutual mistrust from their experiences of policing. They found the police’s presentation to the jury group unpersuasive. David Lammy and Gavin Barwell, who attended the event to hear the citizens’ jury findings told the participants that the same story could be heard across London, from Tottenham to Croydon. They agreed with the Eltham participants that there were too few Londoners in the Met, including white and non-white Londoners.

"Policing can only work through consent", said Gavin Barwell, a point he has reiterated in stressing the importance of investigating the new allegations. A constructive reform agenda might emphasise issues which demonstrate how good community relations will enable and assist good policing, rather than impede it. A CCTV camera in every police van, for example, would protect the reputation of good police officers while offering securer protection for citizens too.

What hope for deeper change this time? Many may take much persuading. Yet it is that long history of reluctant retreat which makes the tone of the initial response from the Metropolitan Police quite striking. "At some point it will fall upon this generation of police leaders to account for the activities of our predecessors, but for the moment we must focus on getting to the truth", said the Met on Sunday night as the news broke. Curiouser still, precisely the same line was used to respond to revelations about the McLibel case at the end of last week, before being recycled and reused a second time as the Lawrence story broke. There is a clear hint that Commissioner Hogan-Howe could decide it is in his interests to cross the Rubicon by standing decisively on the side of robust disclosure, external rather than internal scrutiny and cleaning house. But it would be a big strategic choice, and he would have to move quickly and robustly, to avoid being stranded mid-river.

There will surely be internal pressure for the Met not to have the type of "Khruschev moment" which the statement implies. Hogan-Howe’s holding statement yesterday - emphasising the practical difficulties in piecing together information from reluctant ex-colleagues – sounded like an effort to manage expectations.

The Met cannot afford to come up empty this time. The long era of the cover-up has unravelled, for perhaps the last time. Transparency now is crucial to any credible effort to restore trust.

A general view of a sign outside New Scotland Yard in London. 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?