In this week’s New Statesman: The plot against the BBC

Featuring: Roger Mosey, Jason Cowley, Joan Bakewell, Tristram Hunt, Rachel Cooke and Mehdi Hasan

The plot against the BBC

“If the BBC has often fallen short of its high ideals, one should at least be grateful that it still has them,” says the New Statesman’s Leader this week. After a wave of justified criticism, the BBC has lost the trust of many. But if there is consolation to be drawn from the events of recent weeks, it is that so many expected better from the BBC. We have come to expect failings from successive institutions – parliament, the private press, the police. The BBC, however, retains our trust in its idealism. In this week’s issue, we bring together many voices in defence of the broadcaster, and consider its future.

The editor of the New Statesman, Jason Cowley, writes:

If you were setting up a national broadcaster today you wouldn’t create the BBC in its present form, with its many layers of middle management, labyrinthine processes and structures and its desire to be all things to all people. Yet the BBC remains one of few British institutions . . . admired throughout the world, for its impartiality, the range and quality of its programmes and, in spite of the Newsnight debacle, commitment to truth-telling.

As a senior source at the corporation tells Cowley:

The search for someone to blame is always successful. But the solution to each crisis seems to sow the seeds for the next. So we will probably end up with even more managers, more box ticking, and more compliance ‘to stop this happening again’. I knew something was wrong when the compliance officer became the most powerful person in the building.

Compliance should be left to engineering firms. The BBC needs to restore the culture where producers are given the confidence to produce and editors the confidence to edit. Because that climate was destroyed after Hutton and Brand.

The broadcaster, writer and Labour peer Joan Bakewell puts things into perspective:

Hundreds of hours of [well-researched, responsibly written and overall excellent] programmes pour from the BBC every day. They reach every corner of the country, spread across the world, earn money and reputation . . . and have no commercials! So let’s have a sense of perspective, can we? . . .

Nonetheless wherever broadcasters come together they moan about the BBC. It’s always the same gripe: too many managers . . . Nothing that has happened this week has surprised me. There has always been a paradox at the very top of the BBC.

The head of BBC Television, Roger Mosey, writes about why he promoted George Entwistle, the director general he respected for “his intelligence, his decency and his humour”:

History will judge what George and the BBC could have done better in fighting the firestorm but what I do know is that he’s a good man who shouldn’t be held responsible for the evils of previous decades. And as his colleague and friend in recent days, I know he didn’t deserve the level of national vilification that now seems to be the punishment for anyone who makes mistakes in public office.

In the end, Mosey argues, it is the long-term quality of BBC output that will define the corporation, not its “scandals” and “meltdowns”.

We hold others accountable, so there’s no argument that we should be accountable too. But as a journalistic culture, we should apply ourselves to the difference between what’s serious wrongdoing in the sense of being criminal or wicked – and what’s just a “good” story with fallible human beings at the centre of it.

There’s no question we’ve taken multiple hits as an organisation but you can’t be a BBC boss and not expect periodic crises . . . we know that the BBC’s corporate reputation is destined to have a roller-coaster ride. But the deeper test is what audiences think about our programmes rather than about the corporation itself.

Here there is reason for confidence.

 

ELSEWHERE IN THE MAGAZINE:

 

 

Terry Pratchett: The day he nearly died – and who’s taking over the Discworld

Laurie Penny, who returns to the New Statesman as a contributing editor this week, interviews the comic novelist, campaigner and “professional morbid bastard” Terry Pratchett about his life and work.

Pratchett discloses a near death experience, and also reveals the plan for his daughter Rhianna to “take over the Discworld when I’m gone”. Read exclusive extracts from the story here.

 

Rafael Behr: George Osborne doesn’t see that voters can love the idea of benefit cuts but end up hating the cutters

In the Politics Column this week, Rafael Behr writes about the Welfare Reform Act – due to be voted in on 21 November. “As a piece of theatre,” Behr writes, “the vote on a statutory instrument filling gaps in the Welfare Reform Act is a non-event.”

Yet this shuffling of regulations into law is momentous for hundreds, possibly thousands of families. It finalises the conditions that mean, after April 2013, they could be evicted from their homes. That is when the “benefits cap” comes into force, limiting the amount any household can receive to £500 per week, £350 for childless singles.

Few households are technically in receipt of benefits above the capped level – about 20,000, mostly in London. None of them feels it as disposable income. The numbers are inflated by housing benefit (already subject to a separate cap), which has run out of control chasing the capital’s exorbitant rents. But outrage at perversities in the current system is greater than attention to the detail of who is affected by coalition policy. That anger has been successfully exploited by Conservatives, painting Labour as the party for handing public money to wastrels.

While some of the coalition’s welfare policies might be honourably motivated, the function of this particular change is neither budget consolidation nor reform. It is a gesture of pure political positioning by George Osborne that happens as a side effect to turn some of London’s poorest families out of their homes.

 

“What is the point of me? I don’t really know.” Charlie Brooker interviewed by Helen Lewis

The career of the university drop-out, cartoonist, games reviewer, broadcaster and celebrity satirist Charlie Brooker “has been more a series of drunken lurches than an orderly line”. Helen Lewis talks to Brooker about his most recent pitch-black comedy trilogy, Black Mirror:

Brooker is writing a second series of the show, but I have to ask him: how did it get made in the first place? How do you tell Channel 4 that you want to show the prime minister porking a pig? “That episode was a replacement,” he says. “There’s a script that is as yet unmade, that was bleaker.”

At short notice, he had to pitch to Jay Hunt, Channel 4’s creative officer . . . In the end, Channel 4’s only quibble was whether it had to be a pig. “We went around the houses. We thought about different animals: about frozen supermarket chicken, at one point a big block of cheese. But whatever you tried to substitute for it wasn’t quite the same – like if it’s a sheep, that’s just too comic. I suggested a duck, but that’s again just too weird. A pig is disgusting enough.

 

Ed Smith: King of the spinners

In our lead book review this week, the former Test cricketer and now NS columnist Ed Smith reviews Gideon Haigh’s biography of Shane Warne. “Facing Shane Warne was only incidentally about cricket,” Smith writes. “Sport was the medium but the substance was drama.”

Warne’s cultivation of a distinctive and compelling on-field persona, Smith suggests, was not without its costs:

In seeking mastery of an authentic personality on the stage, authenticity in “civilian” life becomes ever more elusive . . . All great actors sacrifice something of themselves in the pursuit of a truthful performance. So do sportsmen. Warne, the great method actor of modern sport, has perhaps paid a higher price than most.

 

For a review of what's in The Critics section of the New Statesman this week, have a look at our "In the Critics" feature here.

 

Purchase a copy of this week's New Statesman in newsstands today, or online at: www.newstatesman.com/subscribe

 

Charlotte Simmonds is a writer and blogger living in London. She was formerly an editorial assistant at the New Statesman. You can follow her on Twitter @thesmallgalleon.

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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?