David Cameron hasn't spoken about climate change for three years. Time is running out

It’s time the Prime Minister broke his silence and did something before it’s too late, writes Luciana Berger MP.

Climate change has not always commanded the attention it deserves, particularly in recent years. Two events this week have reminded us why we cannot afford to forget about it.

On Tuesday President Obama called for national and international action to tackle global warming.

Less than 24 hours after he finished speaking, the independent Committee on Climate Change warned [pdf] that the UK is not on track to meet its carbon reduction targets.

Their report highlights the grave threats but also the outstanding opportunities that combating climate change presents us with.

The case to act is both clear and compelling.

Our climate is changing. The causes are man-made. And we are already feeling the effects.

This shouldn’t be a matter of debate. The scientific consensus is overwhelming and includes 97 per cent of 4,000 academic studies carried out over the last 20 years.

As the President said himself on Tuesday, we don’t have time for a meeting of the Flat Earth Society.

He has listed Republican politicians who publicly deny climate change on his website. Judging by the noises that have been coming out of the Conservative Party over the past few weeks, we have enough material to start our own version here.

First the Energy Minister, Michael Fallon, dismissed climate change as “theology”.

Then Owen Paterson, the Environment Secretary, denied that the climate has changed – despite the twelve warmest years ever recorded all coming in the last fifteen. He added that any action to combat climate change may do more harm than good.

Elsewhere, Michael Gove is planning to airbrush climate change from the geography curriculum for key stage 3 students. And on the Tory backbenches, their ‘Alternative Queen’s Speech’ includes a bill to abolish the Department for Energy and Climate Change altogether.

Taken in isolation and any one of these examples would be cause for concern. Together, they paint a deeply disturbing picture.

What is even more alarming than what Tory ministers are saying, is what David Cameron is not saying.

At a time when world leaders such as Obama and President Hollande of France are speaking up about why we desperately need to seize this moment, our Prime Minister has apparently lost his voice when it comes to talking about climate change.

Remarkably, David Cameron hasn’t made a single speech on climate change in the three years since he became Prime Minister.

This is the same David Cameron who hugged huskies; said “Vote Blue, Go Green”; promised that his would be “the greenest government ever.”

But when you look at this Government’s appalling green record, it’s understandable why he is keeping quiet.

Our greenhouse gas emissions are going up rather than down: the UK’s carbon output jumped by 18 million tonnes in 2012 – more than any other country in Europe.

Investment in clean energy has plummeted to a seven-year low.

Less people are insulating their homes and the Green Deal, the Government’s flagship energy efficiency programme, isn’t working.

Now the government’s own independent advisors have warned that the UK has fallen behind on meeting our carbon reduction commitments.

It shows what a complete folly it was for the Government to ignore the Committee for Climate Change’s recommendation to set a decarbonisation target in the Energy Bill currently progressing through Parliament. Pledging to clean up our power supply by 2030 would provide a shot in the arm for our flat-lining economy and give the certainty to investors which they are crying out for.

The combination of anti-green rhetoric and inaction also weakens our hand when negotiating with other nations for a new global climate change agreement.

We are approaching the 2015 United Nations Climate Change Conference in Paris.

We need to take every opportunity to build support for an international climate treaty before then and the UK should be at the forefront of that effort.

Regrettably, the Prime Minister decided to omit climate change from the official agenda for the G8 leaders meeting in Northern Ireland. When I asked him about this last week, he said he didn’t see the point of having “a long conversation about climate change.”

Climate change isn’t something that we can wait to talk about next week, next month or next year. Only a few weeks ago the concentration of carbon dioxide levels in the atmosphere passed through the landmark threshold of 400 parts per million.

We have to act now. If we do there is a chance we can avoid a rise in global temperatures of above 2C – the level that scientists have deemed to be dangerous.

With the right strategy, commitment and ingenuity, we can create a new green economy in the UK and unlock massive job opportunities in the process.

Delay or hesitate and we risk being left behind by other countries more willing to face the future and catastrophic consequences for future generations.

It’s time the Prime Minister broke his silence and did something before it’s too late.

Photograph: Getty Images/Alex Hern

Luciana Berger is the Labour and Co-operative MP for Liverpool Wavertree and Shadow Minister for Energy & Climate Change.

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?