"What we are witnessing today is the opposite of voter apathy". Photo: Getty
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"Changing times, changing politics": Douglas Alexander's speech, full text

The chair of Ed Miliband's General Election Strategy on the "profound transition" he sees happening in our politics.

The victory for Ukip in Rochester and Strood, is yet further evidence of changes taking place in British politics today.

All mainstream parties face real and difficult challenges.

And as the Labour party, we need to acknowledge these challenges honestly.  

Because the people we came into politics to serve need us to overcome them and win next May.

Today’s headlines about Ukip don’t tell the whole story.

It is the trend-lines about the state of mainstream parties, more than the headlines, that demand analysis and action from Labour.

It is not simply falling levels of support for all mainstream parties.

It is also rising levels of anger among the public.

And these trends have built up over decades, not overnight.

They were not started by a tweet on the eve of a by-election.

They were started by deep political and economic shifts that are today changing Britain.

So tonight I want to discuss how politics in Britain has been transformed during the past half century and what that means for Labour’s campaign over the next six months.

At the 1951 general election, 96 per cent of the British electorate backed either Labour or the Conservatives on a turnout of 82 per cent.  

In 2010 the two parties combined got just over 65 per cent on a turnout of 65 per cent.

It is now 13 years since any party got more than 40 per cent of the vote nationally in any general election.

All mainstream parties have over the decades not only lost votes… they have lost members.

The UK now has one of the lowest rates of party membership in Europe and one of the steepest declines, despite even the marked rise in SNP membership since the referendum.

Fragmentation seems to be a new norm in politics across much of Europe and the wider world.

And the combination of voter volatility, the demise of deference and the decline of class-based politics is proving a potent driver of unpredictable, and even unprecedented, electoral outcomes. 

When Nigel Farage says that the next election is “up in the air”, it’s one of the few things on which we agree.

The Labour party knows that austerity and the longer-run rise in inequality, is part of the explanation.

But that is only part of the story.

I believe that our generation is living through a period of profound transition, as the politics of the 20th century gives way to the politics of the 21st century.

The politics of the 20th century was largely defined by questions about how we organise modern industrial societies to cope with a newly industrialised world.

And so the dominant political themes were how to generate stable economic growth and distribute national resources fairly.

In the decades after the fall of the Berlin Wall, many felt those issues had been resolved to a significant extent.

The character of 21st century politics is still emerging, but undoubtedly it is already defined by contests about both identity and insecurity, rather than simply economic interests.

Of course issues of economic production and distribution endure, but the rise of identity, culture and self-expression as drivers of people’s vote is a key feature of 21st century politics not only in the UK, but across the modern industrialised world.

This shift was further amplified and accelerated by the recent global financial crisis.

It is hard to overstate the hinge effect of the crash on politics in Britain.

The greatest financial crisis in 60 years has left deep economic scars in our society.

A dramatic fall in living standards and prolonged period of national austerity here in the UK.

The character of our economy is no longer one where sustained growth for the country can be taken as a guarantee of improved personal finances for its citizens.

Everyday life is more insecure and the future more uncertain, with people feeling that they are simply treading water. Working harder and harder to stay afloat.

But to see the impact of the global financial crisis as simply economic would be to miss a central part of its transformative power in today’s politics.

Such a seismic event was always going to both challenge and change our politics.

An increasingly interconnected and interdependent world had already undoubtedly reduced the agency of national governments around the world over the affairs of their own citizens.

But a globalisation-driven generational shift in politics has been fast-forward by the financial and economic crisis of recent years.

The 2008 crash undermined trust in the competence, motives and honesty of the powerful – including politicians around the world - who were seen as failing to prevent the crisis or judged unable to resolve its effects.

That loss of confidence in the competence and probity of the powerful has precipitated an unprecedented fall in levels of trust in mainstream politics.

So today crosscurrents of dissatisfaction – from distrust of politicians to concerns about living standards to fears of international threats – are prevalent everywhere.

This is the ground on which the seeds of distrust have grown.

This distrust has given rise to populism on both the left and the right.

Across Europe there has been an electoral shift to the extremes of politics.

In the European elections this year, there were swings of between 15-20% towards populist parties in France, Greece, Italy and Spain.

If elections were held tomorrow in around half a dozen European countries, current polls suggest that the parties who would get the largest number of seats would not be traditional Christian nor Social Democrats of the centre right or centre left, but new parties more affiliated to the fringe right or far left.

Here in the UK, this trend has been exacerbated by a number of recent factors that contributed to a growing scepticism not just about the agency of mainstream politicians, but also their motives.

The most obvious example has been the expenses scandal in 2009 but that takes its place alongside scandals that have afflicted the banks, the police and the media.

That potent combination of doubt – around motive and agency - has led to a unique crisis of trust that permeates British politics today.

While declining trust in mainstream politics is obvious, what this means for politics in general is not always so easily understood.

Too often, commentators and politicians alike are too ready to claim that this is manifesting itself in a rise in voter apathy.

But this is simply not the case.

Some have tried to dismiss this as simply "anti-politics".

I think that is wrong.

And at its worst, it tries to imply that the voter is to blame for simply choosing to disengage.

But what we are witnessing is not a hostility to politics per se.

What we are witnessing today is, in fact, almost the opposite of voter apathy.

It is active, engaged and it is transforming our politics.

In fact on certain measures, people’s attitudes to "politics" have not changed dramatically in recent decades. 

In the last 40 years, the percentage of public that say they take an interest in politics has stayed at around 30 per cent. 

And people are more likely today to have signed a petition or contacted their MP about a specific campaign or issue than they were 40 years ago.

The best recent example of the fact that it is not true that voters are apathetic to politics per se, is the turnout, engagement and energy around the Scottish referendum in September this year.

We saw over 85 per cent turnout on the day and historically high levels of voter engagement throughout the campaign.

But even outside of Scotland and the referendum, far from seeing the decline of engagement with political parties, we have seen a proliferation of new kinds of parties with growing levels of support.

Across the UK we are witnessing the emergence of parties with what you could call a different kind of business model.

The business model of mainstream parties – of all sides – have, at their best, sought to practice politics with responsibility. To level with people about the causes of their grievances.

And to offer credible, practical solutions that could help improve people’s lives.

For government – and politics – at its best, is about finding shared solutions to shared problems.

Today a very different kind of political business model is taking hold in some parts of the UK.

It sees grievance as a commodity to be quarried for electoral profit. It sells cries of protest to people who feel voiceless.

And it claims to be "authentic" by amplifying voters grievances, too often at the expense of any pretence that they will actually be resolved.

The question for progressive parties – and for Labour across the UK - is how should we respond?

Simply amplifying anger is not enough – we need to offer answers.   

Because there is no alternative that can deliver the kind of progressive change that we believe this country needs.

So our first and most urgent task is to restate the task of progressive politics as one that enables our constituents to harness real power and control to achieve what they set out to achieve.

It starts from respect, deep and real respect, for the hopes, aspirations and dreams of the people we seek to serve.

As an MP today, my job is not to try and wave a wand or pull a lever that can deliver change.

It is to work together with the constituents that I serve to show that when we come together, we can deliver real change for our community.

As a party that seeks to liberate and empower people, our politics must be based on helping people achieve greater control over their own lives: as agents of change, not recipients of benevolence.

Because effective progressive politics is, and has always been, about voices as well as votes.

About identity as well as ideals.

And about listening as well as leading.

That must start with the task of finding new ways of putting down roots in the societies of which we are a part.

That involves how we recruit candidates and how those candidates campaign. 

The stable industrial class-based communities out of which we first grew continue to change.

So we need candidates that can best reflect, as well as represent, the communities that they serve. If we want to become a bigger party, we have to be a party that looks more like the whole of the country we aspire to lead.

And we need to work more like a movement than a machine – with campaigns fought doorstep by doorstep, conversation by conversation and street by street.

Let me give you some examples of what I mean.

The campaign for a Living Wage has inspired thousands of Labour Party members. Labour councils and Labour clubs in our universities have spearheaded the fight for a Living Wage in town halls and campuses up and down the country.

They have stood shoulder to shoulder with people fighting for a decent life for their families; and they have joined non-party campaigners like Citizens UK to get companies to sign up to the Living Wage. Big businesses and small charities have each committed to paying. The cause inspires activists, they build new relationships with people outside formal politics, and progressive change is achieved. Social movements and mainstream politics come together, and not just at the ballot box.

Another example: payday lending. Labour MPs like Stella Creasy took an issue that was of massive concern to their constituents and brought it onto the agenda of government and the media. They joined forces with local campaigners and pursued their goals relentlessly, and have secured major changes to regulation and public law – not by waiting for a general election to come along, but by engaging with their communities and advocating on their behalf.

Labour must be an open party: orientated to a politics that is outward facing and engaged with people who do not sign up to political exclusion clauses, and willing to find shared ground in public life, rather than simply defend tribal territory.

As chair of Labour’s General Election Strategy, I know how important it is to realise how the transformed context of today’s politics has changed the task we face in the next six months.

It has to inform our politics, our policies and our priorities.

That is why Labour’s campaign will be built on three key pillars, setting out a shared task for every Labour MP, candidate and activist across the country.

First, acknowledge and engage with the depth of the anger and concern among so many voters today.

We need to not just listen but to explicitly acknowledge the anger, the grievance and the deeper forces causing economic and political alienation.  

For if we are not prepared to engage with that anger, we simply won’t be listened to, however effective our policy answers.

That means getting outside Westminster and engaging directly with the public; it means opening up the campaigning, meetings and formats we use to ensure in a real dialogue with the public.

Here in Scotland, in the months preceding the referendum, I personally spoke in village halls and church halls, school halls and town halls, from the Hebrides to the Borders.

It was an energising, vital and positive experience and holds lessons for how we must campaign across Britain.

For Labour, it also means using the full breath and talent of our Front Bench and Backbench, because we need to be seen to look like and reflect the country that we aspire to lead.

But we know that acknowledging the public’s anger isn’t enough. 

Second, Labour will tell a deeper national story about our country, our common life and our shared future.

A story not just of pride and patriotism, but of possibility and optimism.

The scale of disillusionment with mainstream politics demands that we share that account of how the country can be different, if we are to confront the view that politics can’t change anything.

That is what Ed’s speech last week did - articulate Labour’s plan to build a country that works for everyday people, and not just a privileged few.

A recovery that works for you and your family.

Where the next generation do better than the last.

And the NHS is there when you need it.

Third, Labour must match public anger with policy answers that address voters’ concerns.

Be in no doubt – the choices on policy in May 2015 will be clear.

From the NHS, to the recovery, from taxation to welfare.

That is why Labour has already set out how we would raise £2.5bn for more doctors and nurses in the NHS.

It is why we have been clear that we would reverse the millionaires tax cut and reinstate the 10p tax band.

Labour’s priorities for government – from raising the minimum wage, ending zero-hour contracts, and a compulsory job guarantee to balancing the books and getting debt falling – will be key to winning back support, but also trust in 2015.

Let me end on a more personal note.

More than a decade ago I worked with my friend, the late Philip Gould, to develop a concept about which we were both troubled.

We spoke often about politics being played like a game in a stadium.

The ball keeps getting kicked around. One side scores, and then the other side does.

But while the players keep playing, the stadium is slowly emptying.

Philip and I talked at the time about the risk of party politics becoming a minority sport.

We shared these thoughts at a time when turnout was falling but support for Labour was relatively high.

A decade on, the issue is not apathy, but anger.

A decade on the issue is not that the stadium is emptying, but that other teams are winning support by playing a different type of game.

Our response, as Labour – like any team determined to win – is not to carry on as before, but to adapt and change.

That is what today’s circumstances demand.

That is what the people who need a Labour government deserve.

And that is what we are determined to do.

 

Douglas Alexander is the Labour MP for Paisley and Renfrewshire South, shadow foreign secretary and chair of Labour's General Election Strategy

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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?