Striking gardeners demonstrate in central London. Photo: Getty
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The Conservatives' attacks on trade unions are an attack on our most fundamental freedoms

In seeking to undermine the Labour Party, the Tories are putting our most fundamental freedoms at risk.

Politics is a battle of ideas and if the voters don’t agree with yours they can let you know in no uncertain terms.  We should all be thankful for that, even if as a Labour MP that message hurts right now.

However, despite this unforgiving political back-and-forth, throughout our recent history there has been an abiding commitment to the ideal of freedom that binds British people together.  That ideal shouldn’t be the subject of debate, but the very platform that allows these debates to take place, transcending the political divides of the day.

This freedom doesn’t just mean the narrow right to elect our representatives, it includes our freedom of speech, freedom from intrusion and the freedom of association, which is protected under article 11 of the Human Rights Act.  We should cherish the fact it is up to us what groups we join and that, within reason, how those groups manage their affairs is beyond interference from the state.  These are our precious rights as individuals and it falls to each generation to defend these liberties, which were hard won by our foremothers and forefathers.                                                                                                   

Yet, in the Queen’s Speech, we have seen this Tory government launch an attack on these freedoms.  Much has already been said, across the political spectrum, about the grave threat posed by proposals to scrap the Human Rights Act and distance Britain from the European convention on human rights, including by my colleague Keir Starmer.

This threat to the Human Rights Act has been coupled with draconian proposals to curb trade union freedoms, which risks taking our country down a dark path.  They are a move away from freedom and towards greater control for the state over the lives of individuals.  In short, the Tories propose to diminish freedoms that are not theirs to give away.

The government is proposing to introduce a new threshold for strike action, in a bid to prevent working people from withdrawing their labour.  This is not just an affront to civil liberties, it also reeks of hypocrisy from a government elected with 36 per cent support of the 65 per cent of people who voted in the general election.  They clearly have a mandate from the electorate and a right to form the government, yet for them to them turn around and suggest trade unions are required to pass an arbitrary 50 per cent ballot threshold is a shameless example of double standards.

Their proposals might have a little more credibility if they were accompanied by measures allowing trade unions to ballot their members in a more modern way.  Many members are reasonably asking, in a world where people do sensitive, private work online, like personal banking, why on earth can’t members cast their ballots on the internet?  It could be done easily and if the right safeguards were put in place, it would increase turn out in ballots, while minimising any potential for voting fraud.  However, the truth is the government is not interested in increasing the say of working people, they simply want to encroach on workplace democracy.

As part of the government’s package of measures, they are also trying to dictate even more forcefully the ways in which the subs of trade union members are used.  This is a bid to make it even more difficult for trade unions to set aside a proportion of their funds for political campaigning, on issues like opposing the exploitation of workers by gangmasters. 

The political funds that allow trade unions to undertake this type of campaigning are already subject, by law, to a vote every 10 years by members, asking if they want to see it continue, while all trade union members have the option to opt-out of the fund if they want.  So an onerous system is already in place to ensure union membership fees are properly used. 

This government is simply trying tie up democratically-run trade unions in red tape.  Yet ask them to take action on tackling legal loan sharks or rogue landlords and the response every time is we are anti-bureaucracy.  Well so much for the government’s ‘red tape challenge’ when it comes to the UK’s biggest democratic organisations. 

Also, let’s be absolutely clear, this is a cynical attempt by the Tories to make it even more difficult for trade unions to donate to the Labour Party.  No doubt hoping that a labour movement, bruised by defeat, will be reluctant to fight back.  In response, we must leave no doubt that the Labour Party is strengthened immeasurably by our links to working people.  The funding we receive from trade unionists comes from the donations of builders, agricultural workers, cleaners and care workers.  It’s the cleanest money in politics, openly and transparently donated by democratic organisations – we are a labour movement and proud of it.  This is a stark contrast to the Tory Party, which is bankrolled by hedge funds and oligarchs.  So if the Tories want that debate, I say bring it on.

Even before this clampdown, British workers already have among of the fewest rights in Europe. Is it right that call centre workers in Hannover or engineers in Helsinki have more rights than a waitress or bus driver in Harlow?  In fact, the restrictions on workers’ rights here in Britain means that we are already in breach of parts of the European Social Charter, which was set up to guarantee social and economic human rights. 

If we allow the Tories to succeed in their mission of further stripping hard won freedoms from the British people we will see our country’s reputation diminished on the international stage. 

With so many people in the world denied access to basic freedoms, we should be proudly acting as a beacon, celebrating and defending our civil liberties.  Instead we are at risk of setting a dangerous precedent that says it is ok to take away freedoms, if the government of the day finds them inconvenient.

There are many people right across the political spectrum who have a proud record of fighting for the rights of the individual and civil liberties.  If we don’t come together now to oppose these attacks, we risk leaving our children a less free country than the one we inherited, which is a pretty miserable legacy. 

Owen Smith is a Labour leadership candidate and MP for Pontypridd. 

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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?