The state opening of Parliament. Photo: Getty
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Maybe we don't need to move Parliament to Hull. But we do need to overhaul its alienating traditions

Woven into the very fabric of Westminster are assumptions about who the building – and, by extension, our democracy – is intended to serve. The lack of convenient disabled access and the shortage of ladies’ loos in the old palace are daily reminders that parliament wasn’t built with those groups in mind.

My earliest political memories are of Betty Boothroyd telling bumptious middle-aged men to be quiet during PMQs. Then, late last year, I interviewed her for Radio 4’s Week in Westminster. From the moment she swept into the studio in a cobalt-blue fur-trimmed coat, I was undone. What a woman.

Boothroyd had come to talk to me about the threat to parliament’s Unesco World Heritage status caused by high-rise developments along the South Bank. There are also concerns about the building itself: it has a rat problem, an asbestos problem, and a chronic shortage of space for the nearly 1,500 MPs and peers (and their staff). What would be lost, I wanted to ask her, if parliament decamped from Westminster?

Baroness Boothroyd is the best-qualified person in Britain to answer this question: she has worked in parliament since 1956, starting as a secretary, before returning as an MP and then a peer. “I was always thrilled to walk across Westminster Hall,” she told me. “The sheer thrill of walking across that great hall to go to work.” She talked about standing reverently in front of the great Armada Portrait of her heroine, Elizabeth I. “I never cease to be thrilled about it . . . What a privileged life I’ve had. I want to preserve that for other people and other generations.”

Much as it pains me, this is where the formidable Betty and I must part ways. Because, when it comes to the Palace of Westminster, the laudable urge to preserve our history has clotted into an unhealthy attachment to the outdated and antiquated. Any attempt to drag parliament into the 20th century, let alone the 21st, is treated by a certain cadre of MPs as a heresy akin to taking a leak on the Bayeux Tapestry.

The most obvious example of this came in 2011, when Speaker John Bercow ruled that the building could probably cope if one of the subsidised bars was turned into a crèche. The bar in question – Bellamy’s – only became part of the parliamentary estate in the 1990s but that didn’t stop a mass outbreak of pearl-clutching and anonymous briefings about the terrible expense. Never mind that it’s not very modern or inclusive to ask parents to work late into the night without any childcare facilities – if it’s the money that worries people, perhaps we could start by decommissioning the 25-yard shooting range in the House of Lords basement?

Woven into the very fabric of Westminster are assumptions about who the building – and, by extension, our democracy – is intended to serve. The sashes to hang your sword in the cloakroom may be a quaint relic of an age long gone, but the lack of convenient disabled access and the shortage of ladies’ loos in the old palace are daily reminders that parliament wasn’t built with those groups in mind.

The BBC’s recent eye-opening documentary Inside the Commons triggered another thought. I watched Jacob Rees-Mogg take to the pettifogging regulations like an impeccably suited duck to water, while other backbenchers who had been, say, bricklayers or heads of charities cheerfully admitted that they found the whole thing completely barmy. And I realised: all the by-laws, the prayer cards to mark your seat, the juvenile heckling in the chamber . . . that comforts a certain type of person, because it reminds them of public school, the Oxford Union, the Travellers Club. They’ve already survived a decade of spotted dick in the canteen and people in silly outfits talking Latin.

I find all this deeply unnerving, because I love history. Love history. Some Commons traditions are definitely worth preserving: every time on Queen’s Speech day that Black Rod is turned away from the House, it reminds us that we have a democracy only because our ancestors fought to disobey the monarch. So I feel a twinge every time someone suggests that we should kick MPs out and make them set up shop somewhere else. The Scottish Parliament building is beautiful – that ceiling, that location – as is its Welsh equivalent, but wouldn’t something be lost by clearing out the green benches and replacing them with a semi-circle of Ikea’s best blond wood?

Looked at dispassionately, the arguments for relocating parliament are persuasive. Andrew Adonis has made the case that moving the institution to a northern city would break London’s stranglehold on power. The former Policy Exchange director Neil O’Brien, now an adviser to George Osborne, agrees. He pointed out in 2012 that: “London is effectively New York, LA and Washington all rolled into one – the capital of finance, culture and politics.” Now, the campaign group Generation Rent has semi-flippantly suggested that the palace could be turned into 364 affordable flats for hard-up Londoners, and selling Portcullis House would generate £500m. Parliament could be shipped off to somewhere like Hull.

Generation Rent's proposal

It won’t happen, of course. There will be enough trouble trying to persuade MPs to move out temporarily while £3bn of essential repair is done to the building: most would prefer that the work be done around them, even though this will cost more. There is also much sniffing about a new education centre turning parliament into a “tourist attraction”, as if many of those tourists aren’t the voters they are elected to represent. The irony is that, if the Commons does crumble into the Thames, it will be largely because the ultra-traditionalists resisted any kind of modernisation for so long.

At the debate in November where Betty Boothroyd raised Unesco’s concerns, the Conservative peer Michael Dobbs recalled that the only reason parliament was rebuilt was that it burned down in 1834. “I am told that when the roof of the House of Commons fell in as a result of the fire, the crowd looking on burst into spontaneous applause,” Dobbs said. “We politicians should know our place.” 

 

Now read the proposal to turn parliament into flats at CityMetric.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 06 March 2015 issue of the New Statesman, How Islamic is Islamic State?

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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?