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For too many families, Christmas is a time of hunger

In Wrexham, something is being done about the problem - but it needs support from the government to go further. 

Before David Cameron became Prime Minister, food banks were rare. Now their presence is a standard aspect of our country today.

In my own community of Wrexham, our food bank opened in 2012. Now, in addition, we know that school holidays mean real hunger for some of our children. This isn’t just a seasonal problem around Christmas – it happens whenever schools close for holidays. The provision which is made in schools to help provide children with food is – by definition – not there once school doors close for the holidays.

There has been a growing recognition of the problem of holiday hunger across the UK in recent months – an All-Party Parliamentary Group has been established and produced a report which can be seen here. To date, the problem has not been recognised, let alone addressed, by the Tory Government.

One of the All Party’s Group’s suggestions is to share work and ideas, and with that in mind, I wanted to set out the work that we have carried out in Wrexham.

To address the problem of Holiday Hunger which is not being recognise or addressed by our Prime Minister, Wrexham volunteers acted.

Wrexham’s project came together when an experienced community worker observed the existence of the problem locally around two years ago. As the UK Government appeared oblivious to the problem, there was no structure in place to help make sure that the many children who receive up to two school meals per day during term time were catered for in the school holidays. These children were going without food, and Wrexham volunteers wanted to change that.

The project began slowly at first – I approached breakfast cereal manufacturers Kelloggs, who have a factory in Wrexham, and asked if there was anything they could do to help. They provided some cereal bars and volunteers helped to distribute them.

From there, the project developed. Volunteers from churches, charities and community organisations provided food and activities once more at Christmas, applying lessons learned in earlier projects to make the scheme more effective. By the Easter holidays this year, a clear approach to a pressing issue was agreed.

Rather than set up different community schemes with food, we would provide food to existing holiday projects.

Led by Sarah Wheat, a Church Worker for the St Asapah Diocese, we worked to set up a scheme where a packed lunch – a simple filled roll, fruit, raisins and a snack such as a scone – was prepared at a local church. These lunches were then sent out to play schemes in the area. This formula proved such a hit that it was repeated throughout the summer holidays. A local school also opened to give children an opportunity to prepare a simple meal and then sit down, eat and enjoy it. 

This Christmas, hot, chunky soup will be made by volunteers and again distributed to local play schemes.

Throughout this year’s summer holidays, the scheme provided thousands of meals in Wrexham and will do so again this Christmas.

From its small scale beginnings, more and more groups have got involved, led by Sarah and her Church in Wales unit. Wrexham council staff volunteered over the most recent summer holidays; 51 volunteers in all gave their help to the project; local faith groups, community groups and other organisations all pitched in in some way. The enthusiasm and commitment of Church in Wales employees went way beyond their brief. Donations and grants came from the Transformation Fund from the Dioceses of St Asaph in North Wales, Kellogg’s, Tesco and the Salvation Army.

Individuals, businesses and community organisations of different types have come together to take practical steps to address a problem affecting the Wrexham community.

What was most important about the scheme was that it was effective. Children were fed, and their behaviour was improved by having a regular, nourishing meal available. Some, who were convinced they did not like fruit, found by the end of the summer holidays, that, in fact, they did. Groups and individuals bonded over meals and good healthy food was discovered by some children for the first time.

The project provided a chance to simply sit and eat together – a very valuable moment for some.  A report back from one play scheme said: “staff on the playground specifically wanted it stated that instances of bad behaviour were very much the exception rather than the norm and they put this fact largely down to the food available during the course of the day.”

The project has proved to be a success here in Wrexham and is doing good work locally. Volunteers believe that their work has many lessons that could be learnt by other groups doing similar work across the country.

Wrexham’s success has addressed the immediate issue in the town, and by the hard work of many volunteers, helped provide food where, before, there was hunger.

We now need to take that work on across the country. The All-Party Group suggest that the Government: “fund the development of resources and training for organisations to deliver and support new and existing holiday provision programmes; research into the scale of child hunger in the UK and its effects on learning; and develop policy to support holiday provision programmes that include meals and enrichment activities.”

The challenge for David Cameron now is to take the work being done in places like Wrexham – set up by volunteers themselves in response to a problem they identified in their own community – and to think about how to apply it across the country, without cutting across others’ work. Our Prime Minister also needs to reflect on why it is that, under his Government, these projects are necessary when prior to his Premiership, they were not.

After Christmas, it will be our duty to put a system in place in 2016 to confront the real problem of holiday hunger across the UK. Government should be playing a central part in that important task.

Ian Lucas is the Labour MP for Wrexham.

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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?