The Lib Dems suspend Rennard from the party

Former party chief executive has his membership suspended in advance of a new investigation over his failure to apologise to Lib Dem women.

Just at the moment when the Lib Dems' former elections maestro Chris Rennard was hoping to resume his seat in the House of Lords, his party announced that his membership has been suspended pending a new "disciplinary procedure". Here's the statement in full: 

Nick Clegg made clear last week, and again this morning, that it would be inappropriate for Lord Rennard to resume the Liberal Democrat whip unless he apologises. Lord Rennard has refused to do so.

The Regional Parties Committee, which oversees disciplinary procedures under the English Party membership rules, today decided to suspend Lord Rennard’s membership of the party pending a disciplinary procedure. As such, he cannot return to the Liberal Democrat group in the House of Lords.

Lord Rennard will now be investigated for bringing the party into disrepute on the grounds of his failure to apologise as recommended by Alistair Webster QC.

Rennard had previously only had the Lords whip suspended but has now been suspended from the party itself. It looks like my source, who said that "hell would freeze over" before Rennard resumed his roles in the party, was right. 

Update: Here's the verbose response issued by Rennard.

It is impossible to describe how enormously distressed I am by this situation and I am certainly too ill to attend the House of Lords today.

In the interests of my party and all concerned, I will now release a statement that I have prepared:

In 2009, I was the subject of a smear campaign in relation to House of Lords allowances. The timing of this campaign was clearly chosen as it was in the middle of major election campaigns, for which I was then responsible. I warned Nick Clegg how I considered that the party might be damaged in those elections as a result of those allegations. I said that I would bring forward my planned resignation as the Liberal Democrats Chief Executive on health grounds. I had not intended resigning until after helping Nick and the party through the 2010 General Election campaign.

I worked for the party professionally for 27 years, I helped it to recover from many crises, helped to win 13 parliamentary by-elections and triple the number of Liberal Democrat MPs at Westminster. But the lifestyle involved did great damage to my health. I was diagnosed as a diabetic in 1994, my control was very poor and by 2007 I was warned that I was entering a high risk zone for a stroke or heart attack.

I explained that health grounds were the reason for resigning. Despite having helped many of my friends in the party and all of the Leaders with ‘crisis management’, I could not handle my own. I was suffering severe stress, anxiety and depression as I have done much of my life. I did not cite this publicly as I considered this to be a private matter and I knew that it would produce very damaging headlines for the party. I know how much of the media behave, and there would have been ‘Stressed and depressed Lib Dem Chief Quits’ headlines in the middle of major elections. It was clear to me then that the smear campaign was run by people with personal grudges against me. I was exonerated by the House of Lords authorities in relation to allowances in October 2009.

During the 2010 General Election, I was again subjected to more personal allegations. The depth of depression that I felt and the consideration of self harm is difficult to describe so I will not do so. I was assured by the party that nobody was making any complaints against me. But at least two women were subject to some media pressure in an attempt to persuade them to make allegations. Immediately after the General Election, I offered to meet them with the Party President at the time, Baroness Scott, to understand what may have upset them and to seek some closure of any issue. I was given the response to my offer to meet. I was told that neither woman wanted to make any complaint or have any action taken. One woman refused to meet. One agreed to meet at a later date. When I did meet her in January 2011, I made it clear that I did not know what had upset her, but said that, “if there is anything that I have ever said or done that caused you any harm or embarrassment in any way, then that was not my intention.” We did not discuss what may have caused this upset at any point, but my expression in front of Baroness Scott, was clearly accepted. This acceptance was repeated later in the day when I received two text messages from the person saying “you are not a bad man” and that “I should not suffer any period of ‘purdah’ as a result of allegations made. We continued the friendly relationship that we have always had.

I had been told by the party previously (2008) that there were questions by some of the media about inappropriate behaviour’ being made. I was never given any names of potential complainants by the party, or told of any complaints (indeed I was assured then that nobody wanted to complain). I said that I had never acted inappropriately and would certainly not want to cause anyone any embarrassment. I felt, however, that the ‘whispering campaign’ from those bearing personal grudges against me meant that my role in the 2010 General Election was limited (at some cost to the party) and I did not help the AV referendum campaign in any significant way.

I heard no more until autumn 2012 when it appeared that a parliamentary by-election in Eastleigh was a distinct possibility. I was involved in some of the essential preparations for the campaign. Shortly after Chris Huhne resigned, I was told that people from Channel 4 were investigating allegations against me and it was clear that I could not help the campaign any further. A broadcast was made on February 21st 2013, which was exactly a week before the most important parliamentary by-election of the Parliament. One of the people featured went to the police with her allegations on the eve of poll of the by-election. I was subjected to a humiliating trial by media and a ‘lynch mob’ mentality from some in the party who knew none of the facts. I tried to protect my party by making only the short, written statements that crisis management required and giving no interviews. Ann and I stayed in hiding for some weeks whilst family friends, and in particular, Alex Carlile QC supported us.

The only communication to me from the party was simply to send me a copy of a complaint form showing that two women were now seeking my expulsion from the party. This was soon overtaken by news that the party were talking to the Metropolitan Police, who would undertake an investigation to see if any ‘criminal activity’ had taken place. At no stage did the party, or anyone from Nick Clegg’s office, ask me for any of my evidence or comments on these matters.

I was shocked to have become the subject of a seven month police inquiry. Whilst I was never arrested, I had to be interviewed under caution. My discussions with the Police provided me with the first opportunity I had ever had to refute the basis of the allegations against me. I was interviewed in June and had to wait until late September when I was actually told by the BBC that there would be no charges. The Police had confirmed with my solicitor Richard Cannon that there would be no charges, that this was a Police decision and that no file of evidence had been given to the Crown Prosecution Service.

The party headquarters did not communicate with me about the Police decision, seek to ask why the Metropolitan Police had come to such a clear conclusion, or even express any relief that I would not be charged with a criminal offence. Before I could make a press statement, the party issued their own saying that their internal investigation into whether I should be expelled would now resume. The party had issued a series of e-mails to all party members saying that I was accused of ‘serious allegations of sexual assault’.

Fortunately, I was familiar with the rules of the English Party’s complaints procedures which were introduced in 2008. There were various attempts to change these rules, but with the help of Alex Carlile, I was able only with the threat of legal action to say that the inquiry should begin as prescribed in the rules.

I formally offered mediation in October 2013 as a route forward via the Independent Investigator. This was completely rejected by the ‘complainants’.

I then felt threatened and bullied by wild rumours that there were many people who would complain against me. I felt that I was being urged to resign my party membership of 40 years on the basis of these rumours.

Following public calls for evidence, when the deadline for receiving complaints passed (November 22nd 2013), I was made aware of complaints from three women (including the woman who had accepted an apology two years previously). This was of course a smaller number of complaints than the number of women who gave interviews to Channel 4 News last February attacking me All the publicity did not result in a single complaint, other than those featured in the Channel 4 programme.

I submitted my evidence which strongly refuted what had been alleged. I had many very powerful evidential and character statements in support of my case. I then waited for the conclusion of the Independent Investigator. Under the rules only two possible conclusions are allowed at this stage. Either the investigator must say that there should be ‘No Further Action’ (as the Metropolitan Police did) or charges must be listed and then subjected to a hearing. The report must be given to just two people, the chair of the party body responsible, and to the person complained of.

I waited for the report to which I was entitled. Alex Carlile QC on my behalf consistently pressed for disclosure of the report to me, as the affected individual. I waited for two days to see it. Then I was informed indirectly by telephone that the party had decided not to accept it, which is against the rules for an independent investigation. I believe that that report concluded that ‘there should be no further action’ and it should have been given to me. The party decided to allow a further complaint to be admitted after the deadline had passed and which had been extended already. I then responded with my evidence to the fourth complainant (who had initially refused to assist the inquiry). Alex Carlile described some of my evidence obtained by research to be ‘devastating’. The party should have done this sort of research a year ago. Assessing the fourth complaint clearly did not change the outcome of the independent inquiry’s conclusion as it was again a ‘No further action’ conclusion.

Last Wednesday, I should have been given a copy of the report. Instead I was told that the party had advice that they could not do so under the Data Protection Act. This is strange since the rules have been in place since 2008; many bodies including Parliament publish reports of this kind and any personal data could have been redacted. I did not ask for the report to be published. I simply asked to be given it, as required by the rules. I have been advised firmly that there is no legal basis for refusing me a copy of the report in appropriately confidential circumstances.

I was informed by Alistair Webster QC at 11 am last Wednesday morning that the conclusion was ‘No Further Action’. He went on to say that there would be a press statement accompanying this saying that I should consider an apology and that some of the evidence against me was credible. He told me that the words accompanying the ‘No Further Action’ statement were not his responsibility and that if I objected to them, then I had to take this up with the party and not with him. I had made the offer to the party to co-ordinate and agree responses to the report’s conclusion (whatever it was) in advance. This offer was not taken up. Mr Webster was advised that the proposed press statement in his name was entirely inappropriate.

I immediately rang Lord Newby, the Lib Dem Chief Whip in the House of Lords, and told him that there would be a major problem if I was asked to do something that I could not do. My legal advice was that, apart from anything else, any apology would leave me defenceless in a future civil action. I believed that this would follow and could then result in my being expelled from the party after all. In any event, I made it clear to Lord Newby that any apology for something that I had not done was not appropriate and could not be accepted by me.

I explained this carefully to Dick Newby who said that there was little that he could do to persuade anyone to change the wording. It then emerged that both Nick Clegg and Tim Farron would issue further statement along similar lines. I did everything that I possibly could in the short time available to say that I should have the report, that I could not apologise and it would be most unwise to demand this.

I did however at the end of the meeting confirm that I was resuming the Lib Dem Whip in the House of Lords at that point, having in the interests of the party voluntarily stood aside from it, pending the conclusion of all inquiries. Dick confirmed that I was re-admitted and we shook hands.

I made my statement last Wednesday, which criticised nobody at all, and there the matter should have rested.

On Friday, I offered the party a way out. The four complainants announced that they would appeal against the conclusion of the inquiry. I suggested that the party should simply recognise that you cannot be expected to apologise when an appeal has been launched.

I am a Democrat, as well as a Liberal, and I believe that Conservative attempts to change parliamentary boundaries in their favour and change the voting registration to deny many people the vote could have resulted in permanent Conservative government for this country. I was happy to work with Nick Clegg to prevent this. My work for the Liberal Democrats over many years helping to win seats for the party, together with Nick Clegg’s brilliant performance in the General Election, prevented a Conservative majority in 2010.

I have not spoken to, met with, or heard from Nick Clegg in eleven months. I would ask him, now that he has more knowledge of the facts, to ask for any threat to me to be withdrawn and to insist that I see the report, to which I am entitled, and to let me help him and my party again in future.

I very much regret the wounds that have opened up within my party because many people have acted without being aware of the facts. I am particularly grateful to my friends and colleagues in the Liberal Democrat group in the House of Lords for much personal support.

I would advise my friends in the party to let the matter rest, as it should have done, with the simple conclusion of the Independent Investigator that there should be no further action.

Courtesy has always been an essential part of my moral compass. If ever I have hurt, embarrassed or upset anyone, then it would never have been my intention and, of course, I regret that they may have felt any hurt, embarrassment or upset. But for the reasons given, I will not offer an apology to the four women complainants. I do not believe that people should be forced to say what they know they should not say, or do not mean.

Ann and I have both been members of the Liberal Party and the Liberal Democrats for over 40 years. Ann has also made great personal sacrifices for the sake of letting me help my party as much as I can. I am of course most grateful to her for sustaining me through this difficult period, together with our families and very many friends in the Liberal Democrats and elsewhere.

Finally, I would like to re-iterate my most grateful thanks also to Alex Carlile QC, who has acted for me as a friend on a pro-bono basis throughout the last year.

I hope that the matter will now be closed by a response to this statement and all threats withdrawn.

Chris Rennard with Ming Campbell at the Liberal Democrat conference in 2006. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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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?