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“Verbal ectoplasm”: what happened at Camila Batmanghelidjh and Alan Yentob’s Kids Company hearing?

The former charity’s founder and chair were grilled for three hours by MPs on the Public Administration and Constitutional Affairs select committee.

Three hours, five revelations

  • Allegations of sexual misconduct were denied by both. Yentob believes they came from a malicious source. Batmanghelidjh claims they are the real reason for the charity’s closure, rather than its financial problems.
     
  • The missing clients – the charity’s records claimed to have 36,000, but only 1,069 of their files were handed over to local authorities – were explained as being held back due to a “data protection” issue by Yentob, and Batmanghelidjh suggested restrictions on the kind of cases they would accept explains this.
     
  • Although he denied any conflict of interest, Yentob admitted he was in the producer’s box during Batmanghelidjh’s Today programme interview, and also made phonecalls to BBC journalists covering the Kids Company story, at one point asking if it couldn’t wait “til tomorrow” because he hadn’t yet heard the allegations.
     
  • Batmanghelidjh accused (without providing evidence) civil servants of briefing against Kids Company – though she denied that she suspected a link between Cabinet Office sources and the sex abuse allegation against the charity.
     
  • Batmanghelidjh claimed that she put her own flat down as surety money, in exchange for Cabinet Office funding, in the event of Kids Company failing to raise enough external funds.
     

How it happened

“There are more journalists here than in the audience,” one woman observed, entering the select committee room, where the now-bust charity Kids Company is being subjected to an inquiry.

And no wonder. Because seconds later, in walked a duo of such epically proportioned egos for which even the most masterful headline-writer would struggle to make room.

Camila Batmanghelidjh, the technicolour tartan, paisley and scarf-clad former founder and chief executive of Kids Company, and the ex-chair of trustees and divisive BBC creative director Alan Yentob, who shuffled in first, his scuffed Nike trainers withering ahead of her hot pink Crocs.

But even the promise of two such personalities was nothing on what they delivered.

They persisted in making as little sense – and as many accusations – as possible in their three hours before the Public Administration select committee’s increasingly frustrated panel of MPs.

As revelations about the charity’s beleaguered funds and other scandals continue to be uncovered, the point of this inquiry is to get to the bottom of Kids Company’s relationship with successive governments. In particular, why the Cabinet Office gave the charity an emergency £3m loan shortly before it closed, in spite of concerns raised about how it was being run.

Not that our antiheroes Batmanghelidjh and Yentrobin were going to help much with this. So fed up was committee member Paul Flynn MP with the former dancing around his questions that he accused her of “a spiel of psychobabble, a torrent of words, verbal ectoplasm”.

Where he got this from – following her simple explanations of children “secreting fright hormones”, how “all scientific research has two sides to the coin”, and that employees’ taxes that weren’t collected or refunded were “conceptualised” – is anyone’s guess.

Committee chair Bernard Jenkin found Batmanghelidjh’s decision to speak just as frustrating as the words she chose. She constantly interrupted Yentob’s answers, “can I please contribute to this question . . . I can be helpful . . . Please!”

“ORDER!” bellowed Jenkin. “I don’t know that shouting is going to get me to behave any better,” Batmanghelidjh replied, never breaking her permanent placid smile.

She insisted that the image of Kids Company giving out sums of money in envelopes to its clients was unfair. “It has turned into the notion that it was handed out willy-nilly,” she said. “It wasn’t. It was accounted for.”

But she was soon contradicted when decrying, “how this myth developed”.

“It’s not a myth though, is it?” interjected Jenkin.

“No, it’s not a myth,” she confirmed. The first of many moments of incredulous laughter from the committee room audience.

She also struggled to answer how and when the safeguarding of children was inspected. “No one wanted those,” she spluttered. “They weren't due for an inspection. Who by? Who do you want?”

Yentob didn’t fare much better. Ever a figure of luvvie-orientated mockery, he looked distinctly like he’d prefer to be back at the Beeb where nothing could hurt him.

Replying to a furious Kate Hoey – MP for Vauxhall and therefore local to Kids Company’s work in Lambeth – on whether charity staff had signed non-disclosure agreements, Yentob admitted two of them had, “just as we do in the BBC when people leave”.

“This isn’t the BBC!” cried the panel. “Are you comparing Kids Company to the BBC?” asked Hoey. “No,” Yentob conceded, dejectedly.

His biggest giveaway was that he was “behind the glass” in the producer’s box during Batmanghelidjh’s recent interview on the BBC’s Today programme. Flynn called this an “abuse” of Yentob’s position as a senior BBC executive, and suggested he was trying to “influence the coverage”.

Yentob denied this, saying he’d only been there to “listen” to her. That's right. He had to be present to listen to a radio interview. He added, “if it was intimidating, I regret it”, and also accepted that he “probably should have stepped down earlier” as the charity’s chair of trustees – a position he’d held since 2003. He had no time, however, for the intriguing “abusive limericks” sent to him by a disillusioned former Kids Company donor.

Batmanghelidjh made no such concessions, accusing everyone – the media, civil servants, lack of government funding – but herself and her right-hand man for Kids Company’s downfall. “I don’t like to make accusations without evidence,” she informed the committee, right after making an accusation without evidence about civil servants briefing against the charity.

The most stunning revelation, however, was wheedled out of the witnesses by the good cop MP Cheryl Gillan, who was trying to establish the relationship between the two. “So you never went out to dinner with Mr Yentob?” “No,” replied Batmanghelidjh. Not in 20 years. “Sorry,” quipped Yentob. But he didn’t look very sorry at all.

Anoosh Chakelian is senior writer at the New Statesman.

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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?