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And then the cupboard was bare - how long can food banks keep pace with hunger?

A year after my first visit to a food bank, demand had doubled. 

Last year, my local foodbank invited me to visit so I could write an article for the New Statesman describing what one afternoon for them was like. My time there was intense and deeply moving. I watched volunteers give out dozens of food parcels, but also provide calm advice, or even just listen, to people visibly in crisis. But much has changed in the past year.

B30 Foodbank, named after the Bournville postcode in Birmingham, serves the southern half of the city, which has a total population of over one million. A year ago, I was struck by how well the volunteers coped with such enormous pressure, but I was glad to see shelves full of food, ready to be given out. Many of those same volunteers are there now, along with some new additions. Given that this foodbank, like so many in the Trussell Trust, operates out of a local church, many of the volunteers are Christian. The majority of those I saw tended to be older and whiter than average in this diverse and young city. Neither of these are growing demographics, and yet they are on the frontline of a growing problem.

I first met B30 Foodbank last year after organising a fundraiser for them. I ran another event this July, raising £1,000, which paid for 628kgs of food. They told me this worked out as about 2,500 meals. It felt huge. It’s roughly how much one person eats in two years, so I assumed it would replenish them for at least a couple of weeks.

Three days later, the fooodbank’s manager, Roger Collins, emailed me to say that on one Tuesday afternoon, between 2:30 and 4:30 pm, they received vouchers for 82 people (47 adults 35 children). This worked out as them giving out 633kgs of food: slightly more than I had managed to buy with £1,000.

I went to see Collins on the Friday. After hearing how hectic it had been on Tuesday, I was relieved to see relatively few people sitting at three small, round tables in the church’s hall. The lack of people inside made the room feel spacious, and those in it more noticeable: a volunteer on one side of each round table and a person in need on the other. There was also a fourth table set against the wall: long and covered with the drinks and foods the team couldn’t put in food parcels, along with snacks like biscuits. Collins said anyone in there is told to help themselves.

The fourth table was also how the volunteers tell how long a person has gone without food. If someone arrives starving, then they won’t stop eating snacks, even during discussion of issues like dietary and fuel requirements. “There’s never anything left on the table by the end,” said Collins.

He took me into the storeroom to show me a food parcel they had just put together for one person. I stared at the tins of vegetables, as I tried to work out how I could combine them with the bag of pasta to make two meals, and then considered what to put with the rice to create another. I quickly felt that, if I was creative, I could make it stretch out for four days. A typical food parcel for one person provides enough food for three days, but, as many only get referred after the problem has become acute, these parcels have to replenish existing hunger, as well as tide them over for half a week.

The shelves at the back of the storeroom were not barren, but they were not full either. Food was separated into types: tinned, dried, cartons, and within that into more specific groups. There were tinned beans, soups, meats, fish, fruits, and vegetables; dried pasta, cereals, and rice; and cartons of long-life milk and juices, along with other essentials like tea, sugar, coffee, and sauces. On one door a sign read, “Keep calm and feed the hungry”.

“Foodbanks shouldn’t exist”, Collins said as I surveyed the room. “So why do they?” I asked. “The welfare state is being destroyed”, he replied without hesitation. We then spoke about that day’s announcement that children’s centres in Birmingham are threatened with closure, due to the city council facing year on year austerity cuts by central government. All services are dwindling, but this one will certainly impact on what B30 Foodbank does. Children’s centres are one of the most common places people get referred to a foodbank.

There are reports that more than a million children could go hungry this summer, partly due to those on free school meals not receiving the same report over the summer holiday. In response to shadow education secretary Angela Rayner’s written question, the government has stated it has “made no assessment of the number of children who are at risk of experiencing hunger during school summer holidays in 2017”.

On the other side of the room to the food, I spotted another cupboard, which I didn’t see there last year. It housed non-food personal hygiene items, like toilet paper and nappies, toothbrushes and toothpaste, shower gels and deodorants.

“It’s because of I, Daniel Blake,” Collins said. That film not only impacted the way in which people saw those in crisis, but also broadened ideas about what their needs were. Now they often receive, amongst other items, boxes and boxes of tampons, and sanitary and incontinence pads.

Collins led me through to the hallway, where a noticeboard held up photos of bulk donations, including mine, but also monthly and annual reports on how much they are giving, receiving, and where its all coming from and going to. B30 Foodbank’s figures mirror those of the national Trussell Trust: almost 40 per cent of those receiving food are children. It was about the same last year.

But I was faced with one stark difference between now and then. The amount of food given out has risen exponentially. In some months, it is double the previous year’s figure. Contributions have also risen, but, on balance, there is no doubt demand has outpaced donation. Between August 2016 and July this year, the foodbank gave out 60,772kgs of food, but only received 58,660kgs.

Based on what I managed to purchase, that is a gap Collins and his team will need over £3,000 of donations to fill. However, should this pattern continue, a new crisis will emerge, one in which the foodbank’s reserves will run out and they may not be able to feed everyone who comes in. Some difficult choices would follow.

I asked Collins why it is that the single most common reason for anyone coming to a foodbank is that their income is too low. “It’s the gig economy,” he said. A few weeks prior, a young man came in for support, with his Deliveroo bag still on his back. He had a job, but the low pay and high expenses meant he had no money left over to buy food.

“A lot of demand comes from debt, but also changes and delays to benefits,” Collins told me. This includes payments for those in work, but the changeover to universal credit has been problematic for those on benefits, as is homelessness. However, as the Deliveroo worker demonstrates, a lot of those in crisis are also in work.

If this government doesn’t address stagnant wages amidst an increased cost of living, then working poverty will only continue to rise, and sooner or later, foobanks like B30 could go bust.

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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?