Chuka Umunna's speech on aspiration and social mobility: full text

"We’re here because we understand – deeply – that the future of every person is diminished when the future of one person is threatened."

Thank you so much. It’s a great honour to speak here tonight.

 

With the support of your colleagues on the executive what you are doing at LFIG is really fantastic.  Strengthening the organization, raising its profile, extending its reach across the country.

 

Together, you are making a very important contribution on many issues critical to our nation’s economic future: from those affecting the very biggest corporations through your work on takeovers, to the very smallest with your taskforce on freelancing.

 

And I think our trip to China showed the vital role you play in taking the Labour Party to places it might not otherwise go or reach when out of Government. We are better for it.

 

So it is for that that, above all, I must thank you David – and all of you here.

 

Now, I’m among friends, so let me start with an inspiring story about a dashing, young Labour candidate trying to win a crucial marginal seat in a tight election.  Smart suits.  Strong brows.  And a bouffant of hair that, quite frankly, a man like me can only envy.

 

Yes, the year is 1974, the constituency is Harrow Central, and the candidate is our very own David Offenbach.  And here he is!.

 

Yes, I like to think that – had this not been somewhat pre-Baywatch – they might have called him The ‘Off.  

 

Now, let’s have a look at what he was running on.  Ah, yes – a living standards crisis, caused by Tory economic failure. 

 

In a phrase that seems remarkably prescient today, he says: “Can we afford another FIVE YEARS of Tory rule, after the price we have paid for the last three and a half?”

Back to the Future indeed.

 

Now the first thing it tells you is just how long David has been a loyal servant to the Party. 

 

But – more than that – it shows the wisdom he had, even in the first blush of youth.  Listen to what he says,

 

“Too many things have been devalued in recent years – not just the Pound, but truth, and faith in democracy. Very simply, and sincerely, I ask for your vote so that I may strive through Parliament to have these values honourably restored.”

 

Even then, well before I was even born, David was already worried about the loss of faith in politics and the dead-end policies of division.  And so he spoke of the need “…to turn the hopes and exertions of the people in a new direction”. 

 

I think he was on to something.  

 

Sadly, David did not win that election, the first of two in 1974 – although of course the Labour Party did, just about. 

 

Now is not the 1970s and we face new and different challenges.  But, once again, it falls to us – this Labour Party – to give voice to those who are struggling under a Conservative-led government, as household bills rise faster than wages. 

 

It falls to us – this Labour Party – to be strong in standing up to the powerful.

 

And, once again, it falls to us, in David’s most elegant phrase, “…to turn the hopes and exertions of the people in a new direction”. 

 

Why? Because this is our Party’s defining purpose.  Working together to lift people up, to empower them to meet their aspirations and take advantage of the opportunities today. 

 

And that is why each of us is here tonight.  Because we know how much politics matters.

 

It might seem obvious to say, but we all know that a lot of people are fed up with politics. That a lot of people are losing faith in it.

 

They think we’re all the same.

 

But we know it does matter. It matters who is in Number 10. And it matters in whose interests they are working.

 

Here tonight, we know the clock is ticking. That 2015 election is just 520 days away. 

 

Some say it’s going to be a referendum on the Tories.  Or the coalition.  Or that it will be a contest of character – a contest, by the way, I am confident we would win.

 

But it’s not about that.

 

It will be about the future.

 

It will be about the cost of living crisis that has seen people take a £1,600 pay cut and costs increase faster than wages in 40 of the 41 months under David Cameron. 

 

It will be about the kind of nation that we want to be, and in whose interests our country is run. 

 

So tonight, I’m not going to talk so much about specific policies as I am about our approach.

 

To win in 2015, Labour must be - and we aim to be - the Party of the future, about the future, for the future.  For unity of purpose, over discord and division.  For the many not the few.  For hope and possibility over fear and blame. For what, together, we can become. 

 

We must be the Party that speaks to people’s ambitions, hopes and optimism.

 

Think about it – when you were a kid, what did you want to be? Everybody wanted to be something! 

 

One of the things I love most about my job as an MP is going to local Primary Schools - listening to the ambitions and soaking up the excitement our kids have for the future. I went to one of those schools myself. Those kids are me… minus a few years!

 

I see the amazing work and effort of teachers to give kids a really strong start to life. And I’ll speak to classes and assemblies and one of my favourite things is to ask the question “So what do you want to be when you grow up?”

 

Whatever school you’re in, the response is always the same. All over the room, hands shoot up – kids eager to tell you. And you’ll have those wanting to be footballers, actresses, doctors, singers, astronauts etc.

 

Then think about when you left school and you were starting your career and trying to figure out what you actually wanted to be. Or for the entrepreneurs here – when you started on that journey of making it happen.

 

I think the dreams we had as kids - the hopes and ambitions we have as adults – they show an eternal human truth.  Even when it’s not a formal, conscious thought.  We’re always looking forward. To tomorrow – to next week – to next year and beyond. And that gaze and purpose towards our future never leaves us.

 

But, here’s the thing: the impulse to look to the future might be shared by us all. But not all of us have access to the means to realise our dreams.  

 

We know that for too many people in Britain, the gates of opportunity remain firmly locked.

 

Think of the 18 year old, who has been unemployed for more than six months, though not for want of trying.  She’s one of the 10% of her age group who lack ‘Basic Online Skills’- she can’t send an email or even search for something online.  And this is supposed to be the most tech-savvy generation ever.

 

And all she’s thinking of is the next thing she needs to do to survive. She simply doesn’t know what next week will hold, or where her life is heading.  And the unknown is uncertain – and uncertainty breeds insecurity.

 

Or think of the dad who works full time, but is one of the 4.8 million who earns less than a Living Wage. His vision of the future is one of stress and worry about how he’s going to put food on the table for his kids. He’s working as hard as he can, but it’s just not quite enough.

 

Alan Milburn’s Social Mobility Commission tells us that nearly half of all children who live in poverty are from families where at least one parent works full time.

 

Or think of the mother, who is working so hard that she simply hasn’t got the time or the energy to read to her daughter – though she knows that if she doesn’t, it will be her daughter who will pay for it.

 

Only two in five children from the poorest homes are read to every day, compared to four out of five from the richest families.

 

And there’s the fifty year-old, whose business has just closed down because a competitor abroad could do it cheaper. He doesn’t have the luxury of a vision of the future, when his biggest worry is what he’s doing next.

 

All of these people are looking to the future, but for far too many the future is bleak.

 

So they don’t care about the Westminster soap opera; the rhetoric of the left and right; a percentage change in the latest poll.

 

What they worry about is the fact that even if they do the best they can for themselves and their families, for them the padlock will remain on the gates of opportunity. 

 

Because in modern Britain – more than in most OECD countries – your background still determines your destiny.  Not your innate talent, ingenuity and sheer hard work.  For too many, their future is still determined by the circumstances of their birth, not the content of their character.

 

That’s not good enough and changing this is our Party’s defining purpose. 

 

Working together to bring the dreams that people have into reach, to achieve their aspirations and ambitions.

 

Or, as it says on all our membership cards, “…through the strength of our common endeavour…to create for each of us the means to realise our true potential”. 

 

Yes – it’s about those words – dreams, ambitions, aspirations – made real through common endeavour. 

 

This is Labour’s mission.  Now the problem is that too often progressives - the centre left - have ceded this kind of language to our political opponents. 

 

When I mention the words ambition or aspiration on Twitter, I usually get kick back. “Thatcher’s child”. “Are you a Tory?”. That type of thing.

 

But it is not about individual aspiration over community.  It is about both pulling together.  That is the history of our movement, the story of our struggles, and our mission today.  It is that it takes a community, it takes a movement, it takes a struggle, “to create for each of us the means to realise our true potential”. 

 

That is what Ed Miliband means when he talks about One Nation, where the gates of opportunity are truly open to all. 

 

Now, in recent weeks, John Major has emerged from the shadows to highlight the problem. 

 

He glosses over the fact that his and Margaret Thatcher’s administrations greatly exacerbated the situation.

 

Never mind.   He has done us all a service in pointing out that his improbable journey – from Coldharbour Lane to Downing Street, and of his family from the music hall to the Commons chamber – has become even less likely in Cameron’s Britain.

 

But though he has highlighted the problem, the ideological approach of the Conservatives will only make matters worse. 

 

Though they talk the language of aspiration and freedom, their idea of freedom is meagre.  It is a vision which insists that less support is always more; that abandons people to the unpredictability of the market; that takes no account of where people start from or the resources under their control.

 

Their idea of freedom will serve only to bolster the power of the strong over the weak, to entrench the privilege of the few over the many. 

 

And what this means as a programme for government is now becoming clearer.  In opposition they adopted the language of modernisation, but they’ve junked that agenda in office. They once said cuts to public spending would hurt them more than it would hurt the rest of us. Tell that to the people of Britain after 3 years of regressive policies.  Now David Cameron is committed to permanent austerity, not out of need but out of choice.

 

So under David Cameron, the spectrum of unequal futures will widen. The basic hope of giving our generation’s children a better life than ours will disappear. Ambition is replaced by stress and worry. Hope by blame.

 

He is making things worse now, and worse in the future. 

 

Real freedom means freedom to pursue that vision of a bigger life.  To make our ambitions possible. 

 

That kind of freedom requires positive action and common endeavour: a community to help and an active government, creating the conditions in which people can become self-reliant, empowered to achieve their ambitions. 

 

This is our mission, and this is the future we seek to create. 

 

It demands we do two things.

 

First, it means doing what Labour has always done best: standing up to the powerful, protecting people from harm, alleviating their sources of stress and helping them to solve their problems. Providing a safety net. 

 

Because we’ve seen, especially in recent years, that sometimes bad things happen to us and our neighbours that – despite our best efforts – we couldn’t stop.

 

That’s why we don’t believe you should walk away from a friend in need.  That’s why we set up the NHS; it’s why we established the National Minimum Wage. And it’s why we will now scrap this

Government’s cruel and unfair Bedroom Tax and will work towards a Living Wage.

But to be the party of the future, we must go further.

 

Because we’re not just about the safety net, but also about giving hope and creating opportunity for people to realize their aspirations. Not just about alleviating a future of stress but going beyond it to create a future of possibility.

 

So when we’re on the doorstep in 2015, it’s not just about the next five years, but the five years after that. Its about explaining to the parents of those kids that I see in the schools in Streatham what their futures will look like after a decade of growing up under a Labour Government. A 2015 manifesto with an agenda for 2025.

 

This is why our commitment to implement a comprehensive industrial strategy is so important. Strategically working with the sectors which will deliver growth in the future.  Creating the right environment for businesses to grow and innovate, with a proper British Investment Bank, regional banks, more and better quality apprenticeships and strong regional institutions for growth. 

 

That industrial strategy will enable us to tell a story about the direction the next Labour Government wants to take our country in the long term and the opportunities, working with business, which we seek to generate for people as a result.

 

And you embody this side of our Party – the side that looks to create a future of opportunity. People who make things happen, but recognize society provided them with a platform to help them do it.

 

So we need you to go even further in advocating the values of the Labour Party; communicating, defending and arguing for the policies of the Labour Party – and the stark choice that faces the people in 2015.

 

And we need you to continue to be great role models of what business and industry can be – a powerful and vital member of the community that enhances every part of our country.

 

And that’s what we’re here for – the future of all the people in this country.  We’re here because we understand – deeply – that the future of every person is diminished when the future of one person is threatened. That we are one Britain – One Nation.

 

We’re not here just to elect Labour, we’re here to secure our nation’s future. We’re here to create a future of opportunity for all of our people.

 

Thank you.

Chuka Umunna speaks at the Labour conference in Brighton earlier this year. Photograph: Getty Images.

Chuka Umunna is Labour MP for Streatham.

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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?