Michael Dugher speaking at Labour conference last year. Photo: YouTube screengrab
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"Too many pointy-heads and too few street fighters": Labour's Michael Dugher on what went wrong

Michael Dugher MP, who served as vice-chair of the party in Ed Miliband's top team, on identity politics, emotion over intellect, and "fucking up" the Scottish referendum campaign.

Michael Dugher was watching television at home in Barnsley, South Yorkshire, when the exit poll was released at 10pm on 7 May. Normally, he is willing to concede the remote control to his three children, who prefer the Disney Channel to politics, even when their father is on screen. But this was a moment he couldn’t miss. “It was quite a big shock,” Dugher says, wincing at the memory of the poll, which gave the Conservatives a firm lead. “It was genuine disbelief.”

He sighs. “And then we had the Nun­eaton result [a target seat, which Labour lost]. It’s funny, really. It’s like conceding loads of ­early goals and you know the rest of the game is over. I knew we were buggered.”

It can’t be easy for someone such as Dugher to lose control of the ball as spectacularly as Labour did that night. A veteran backroom operator, he is still known in Westminster for his time in Downing Street as Gordon Brown’s spokesman. After his election as MP for Barnsley East in 2010, he continued in the vein of a Brownite fixer for Ed Miliband’s team, becoming party vice-chair in 2011, doggedly attacking the government and keeping an eye on the grass roots.

But this formerly loyal figure now has something to get off his chest. We meet on the Commons Terrace the Monday after the weekend of shock and heartache post Labour’s defeat. I can see a Tory MP enjoying a bottle of champagne with his staff two tables away. Dugher is attempting to eat a collapsing burger from a polystyrene box. I can’t help commenting that at least it’s not a bacon sandwich. He grins, valiantly.

The Yorkshireman is back in parliament for the first meeting of Labour’s new shadow cabinet, in which he’ll remain shadow transport secretary (a position he has held since last November). He looks smart and ready for business, in a dark jacket, pale blue shirt and gold cufflinks. But his eyes, squinting against the glare of the afternoon sun, ­betray his exhaustion.

Unlike many of his colleagues, Dugher increased his vote share and majority. But Ukip still came in second in Barnsley East, with more than 9,000 votes. “I was one of the people in the party pressing for a stronger response against Ukip back in 2013, and was frustrated that it didn’t happen,” he says. “But I certainly did it in my own patch.” He is perturbed by Labour’s failure to connect with the white working-class population it used to represent. “Working-class voters are not core vote any more – you saw that in Scotland, you saw that in England,” he says. “When we fail politically, we fail the people that we came into politics to represent. I find that – being entirely self-critical – absolutely unforgivable.”

Labour’s vice-chair grew up in a pit village ten miles from his constituency, part of a family of six living in a three-bed house overlooking the colliery. It was his work in unions that landed him a job as a special ­adviser. Yet he didn’t manage to use his background to steer Miliband’s team.

“Like other aspects of our election campaign, we were a bit behind the curve on Ukip. To be honest, the party only really got it after May last year. But it had been frustrating, me and a number of colleagues, who had been . . .” he trails off. “There was a ­naive assumption, back in 2013, that, because Ukip was bad for the Tories, therefore it must be good for us. Whereas, it was really bad for the Tories but quite bad for us.

“We need to drill down and deal with that. These are basically white working-class people. All of us in politics have had blind spots and everything else, but I grew up in a pit village in the Seventies and Eighties, through the miners’ strike. That is the demographic I really do understand.

“Spend time in the real world,” he adds. “We do dwell in London, the Labour Party. And London has cheek-by-jowl poverty . . . but the truth is, there is more to this country than that kind of metropolitan, multicultural, liberal left that is a big part of London. I thought the best thing Ed did was about One Nation. And we just dropped that.”

Dugher admits that Labour’s campaign “didn’t have a wide reach” and is effusive about needing to appeal to the “aspirational middle class” – something recently voiced by leadership candidates Liz ­Kendall and Chuka Umunna as well as by members of the Blairite old guard such as Peter Mandelson. “Equally, you have to reach out to the alienated working-class voters,” he adds. “Aspiration is not an exclusive thing for middle-class voters. Working-class voters are aspirational.”

He places both hands over his heart as he says, “I know that, personally. If you’d have asked me aged ten what I wanted . . . I would have said I would’ve liked my parents to be able to afford a car; I would’ve liked us to go on a foreign holiday. We lived in a warm, loving house, but it was quite a small house for six people, and I might have liked my own bedroom. That’s working-class aspiration.”

This was overlooked by Miliband’s top team, who were drawn from a narrow background. “I’ve always thought that politics is 90 per cent emotion. All parties need a combination of people with different talents and reaches. Ed was very intellectual, he had a brilliant brain; he felt that ideas were the most important thing in politics. And he’s right. But I sometimes felt that he surrounded himself with too many people who were socially just like him: all living within a stone’s throw of each other in north London, all had been to the same university, and all kind of intellectual ­academics . . .”

It is easy to say such things in hindsight, but did Dugher ever warn Miliband about his myopic circle of advisers? “Loads of times. It happened all the time,” Dugher nods. “He’s someone who listened. But he had other people who were more influential, closer to him. You know, you win some, you lose some. But that was always a worry I had. It was too many pointy-heads and too few street fighters.

“As a leader, you’ve got to surround yourself with different people. Ed had some of those people, so I don’t want to overstate it. But too many were just like him. And, for them, politics was 90 per cent intellectual. If the big thing out there is anti politics, you’ve got to show that, actually, you do get it, you are in touch, and you understand.

“When I say it’s 90 per cent emotional, the new axis we’ve got in politics now – the politics of identity – is all about how people feel. We’ve got to get wise to that.”

Dugher refers repeatedly to English identity. “In parts of my constituency, they do fly the flag. And they’re right to be proud of it. It’s as much about their pride and identity as it is a cry for help,” he says. “When they fly that flag, they say, ‘I’m proud of this country, I’m proud to be English, I’m proud of where I come from’; but also, ‘We haven’t gone away, and we deserve a voice, too’.”

With visible frustration, Dugher recalls speaking to Miliband before the Scottish referendum result. “I said polling day will be all about the Scots, but Friday morning will be all about the English. And we need to be out ahead of Cameron with a really serious offer to the English. In the end, it was Cameron who was on the steps of Downing Street. Now, his offer [English votes for English laws] was minuscule, and a threat to the Union; but we were slow off the mark.

“Because too many people didn’t get it, and because we’d incompetently scheduled our conference for the weekend after the referendum, the leadership wanted to close down the issue, and to go back to talking about the cost of living, or whatever it was. We should have welcomed that opportunity to lead that debate. Instead, it was a kind of ‘constitutional convention’, and a ‘regional tour’,” he grimaces. “Which I just don’t think did it.”

Dugher is even more despairing of what he calls Labour’s “annihilation” in Scotland. He blames the Better Together campaign. “Scotland and our approach to it was an unmitigated disaster. We totally fucked up that referendum campaign – and that would almost be a generous and kind interpretation,” he gives a hollow laugh.

“There was a highly visible elephant trap that the SNP set for us, which is that Labour and No would be for the status quo, for Westminster, for London, for the old political establishment and elites – and Scottish Labour all joined hands and they jumped into that elephant trap,” he says. “We shouldn’t have been in bed with the Tories. It was a complete strategic disaster. It killed us. It should have been a contest between two competing alternative visions for a changed Scotland.”

He reserves harsh words for the Scottish Labour MPs, all but one of whom are now out of a job. According to Dugher, many were apathetic about campaigning in their “safe” seats, and shut their English colleagues out of discussions. “You had the politics of neglect,” he says. “Not all – there are some great colleagues who worked extremely hard. But we also had a number of people who had not delivered a leaflet in decades. And there was always an attitude from some of our Scots [MPs] here, that they knew best. ‘Leave Scotland to us,’ they used to say. Well, that worked out well, didn’t it?

“At the same time as making a complete balls-up of Scotland, it had profound implications for England. They wanted to operate in Scotland without any reference at all to the impact on England. Every time they talked about further devolution, the English in the Labour Party were excluded from that conversation.”

Dugher is cagey about who can pull Labour out of this nadir. He does, however, recommend that the party takes its time. “I don’t think we should have a coronation. And it’s perfectly possible for us to chew gum and walk at the same time. We can have a thorough internal debate about our way forward while going after this Tory government.”

But one thing set in stone is that no future Labour leader will ever carve their pledges on to an actual stone again. “Every campaign has balls-ups,” Dugher sighs. “That was a kind of 12-foot, granite, marble, cock-up. But did it change the weather? Nah.”

Anoosh Chakelian is senior writer at the New Statesman.

This article first appeared in the 14 May 2015 issue of the New Statesman, The Tory triumph

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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?