Natalie Bennett on polling day. Photo: Anadolu Agency
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"This leftwing label is potentially unhelpful": the Greens on why they missed their moment

What happened to the Green Surge, and why aren't the Greens on a par with their European equivalents?

The 2015 general election was supposed to represent the culmination of the #greensurge. Instead, Caroline Lucas finds herself as lonely as ever in the House of Commons.

Even Brighton is no Green fiefdom. Lucas was re-elected with majority of 8,000 in Brighton Pavilion, but this was more an endorsement of her assiduousness as a local MP than her party. The Greens lost nine of their 20 seats on Brighton and Hove Council on polling day. Lucas was re-elected as a quasi-independent: she criticised aspects of the Green party’s minority control of the Council, for example, the hike in the cost of seafront parking to £20 a day, and made scant reference to the party on her leaflets.

No other Green candidates won, but the party still gained over a million votes – a 900,000 increase on 2010 (albeit partly accounted for by running an extra 250 candidates). Yet in a sense the election campaign merely highlighted how far the party lags behind its sister parties on the continent. The Greens even lost ground in Norwich South, where it had recorded its second best result in 2010.

Successful Green parties in Europe have cultivated an unthreatening image to win favour with the urban middle-class. But much of this demographic in the UK simply found Natalie Bennett too zany to countenance supporting her party. When the Greens should have been articulating their well-honed pitch a week before polling day, Bennett was discussing three-way marriage.

“Sandals and t-shirts with slogans on doesn't do us any favours,” says Darren Hall, the Green party's second most successful candidate in the general election, admitting that many voters “unkindly” still associate the party with hippy types.

No one would level that charge at Hall who, with his immaculate suit and background in the civil service, is considered a "textbook" new type of Green candidate. He finished second in Bristol West after a remarkable swing of 23 per cent – one of the largest swings in electoral history in England, driven largely by the collapse in the Lib Dem vote. Hall represents a rejection of the notion that the Greens should be a glorified pressure group.

“One of the reasons I was asked to stand, and why I was happy to stand, was to try and help take green politics in a slightly different direction and give it a credibility in terms of having done some jobs that mean I know what I'm talking about,” Hall says.

He accepts that the Greens will not match the success of its sister parties on the Continent without being seen as economically competent. “As shown by the Tories winning, people are most focused on economic issues,” he says. “I don't think the Green party has yet made its case about its ability to be economically credible and savvy.” In his campaign, he sought to cultivate support from social enterprises and small business, something too few candidates elsewhere did.  

“That rhetoric about being anti-growth – that's far from the truth, but we are yet to make the case in a way that people can understand,” Hall asserts. “This leftwing label is potentially unhelpful but we need to be absolutely clear that we are a party that is all about equality. That doesn't necessarily need to equate to being on the left.”

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Hall’s message is strikingly similar to the advice to the Green party from Russell Norman, who has just stood down after nine years as the co-leader of the New Zealand Green Party. In New Zealand, the Greens have established themselves as the third party, recording 11 per cent in the last two general elections.

While Bennett was mercilessly pilloried for her spending pledges at the last election, the Greens in New Zealand have emphasised economic competence. “Economic policy in a sense becomes a kind of signifier of how serious you are about politics,” Norman reflects. “We needed to apply ourselves to the concerns that people have in everyday life – jobs, income, housing, all that kind of stuff needs to be relevant. You can't expect people to vote for you if you're not relevant on all those things.”

The Greens’ success in New Zealand has followed the party’s decision to dress like politicians, suited and booted at every turn. “The way you look is important, so that that doesn't become a problem,” Norman says. If the electorate is thinking about what a candidate is wearing they’re not focusing on what they’re saying.

Of course, the Greens in New Zealand and Europe have a big advantage over the party in England: proportional representation. “It’s been critical, really; PR changes everything,” Norman says. Last month, the Greens received 300,000 fewer votes than the SNP, but 55 fewer seats.

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But carping on about voting reform will not get the Greens very far. The UK decisively rejected the chance to embrace the Alternative Vote four years ago; a derisory 13 per cent of eligible voters supported AV. First-past-the-post is here to stay for the foreseeable future.

That is a fact that the Greens might need to confront. The party fielded 575 candidates across the UK this year, much to the delight of the Conservatives, who pushed for the Greens’ inclusion in the TV debates as part of a strategy to split the left.

The notion that a divided left allowed David Cameron to become PM is hogwash. But it helped. Had 3,000 Green voters plumped for Labour instead, Cameron would not have won a majority. After election night, Lucas expressed particular regret that the Lib Dem Norman Baker had been defeated in neighbouring Lewes; the Conservative candidate won by 1,100 votes in a seat in which the Greens got 2,800 votes.

“I personally think that longer term we have to do all we can to avoid fragmenting the vote between progressive candidates,” Lucas tells me. “We're nowhere near deciding any details and the comments are purely my own, and not an official party view. Clearly it would only apply in first-past-the-post elections. It's also a decision that would ultimately be made by local parties.”

And the broader challenge for the Greens is simple but profound: to professionalise the party without losing the sense of authenticity that attracted people to it in the first place. The party needs to become far more effective at selling itself; it took the Green party in Brighton Council three and a half years to get a full-time PR officer, by which time opposition parties had successfully defined the Council as a ragtag bunch.

The Greens were also slow to begin electioneering before the general election. “A year out from a national election you've got to go into campaign mode,” Hall says. “We only really got started about six months out.”

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Most fundamentally, the Greens need to sort out their policy-making process, which senior party figures liken to an albatross. Policies are made and voted for by members, and remain party policy indefinitely, hence why the Greens were castigated for proposals to limit UK copyright terms to 14 years. The Greens retain identical policies to those that party members voted on 30 years ago.

“We've got to be credible in all kinds of ways, and we've got to focus on our manifesto, not on the historic party policy framework,” Hall says.

Nationally, the Green campaign was disjointed and utterly bereft of any message discipline. Bennett also singularly failed to take advantage of the opportunity presented by her inclusion in the TV debates.

“The perceived injustice of being excluded from the debates was a far bigger magnet for the party than anything Natalie Bennett could have actually said or done in the debates themselves,” says Adam Ludlow, senior consultant at polling company ComRes. “When the demands were finally acceded and the party included, the moment went and the Greens drifted back close to where it had been for the past few years.”

If Bennett does not perform well in the London Mayoral election next year, in which she is very likely to stand, her position could be vulnerable when the party’s next biannual leadership election takes place next September, and she may not even stand.

When Lucas resigned as leader in 2012, the hope was it would give her successor a chance to develop profile and join her in the Commons. Bennett was encouraged to stand in Norwich South, but avoided standing in any sort of target seat at all, instead running in the uber-safe Labour seat of Holborn & St Pancras. In a sense this is emblematic of the Greens' sense of missed opportunity. For all the astounding gains in Green party membership – which has increased fivefold, to 66,000, since the start of 2014 – how the party translates this into electoral gains under first-past-the-post remains unclear.

“The culture of the organisation is now growing up,” Hall says. “I hope that over the next five years there will be a move towards a better ability to communicate what we're all about.”

Tim Wigmore is a contributing writer to the New Statesman and the author of Second XI: Cricket In Its Outposts.

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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?