The truth about London’s “white flight”

A fall in London’s “white British” population does not mean the city is now “majority-migrant”.

London remains a majority-white and majority-British-born city. That was what the 2011 census found. But you may be surprised to hear it, since London now being "45 per cent white British" was one of the most prominent headlines of the 2011 census. Loose discussion of the finding has created a misleading meme. The 45 per cent figure has been received by many ears as suggesting that the capital is either “majority-minority” or “majority-migrant”. Neither is true.

The census facts are clear: our increasingly diverse capital is 60 per cent white and 63 per cent of Londoners are British-born. 

Overall, three-quarters of Londoners are British citizens, and under a quarter are foreign nationals.

But a discussion which conflates ethnicity and nationality risks misleading people about both dimensions. The official census media briefings prominently flagged up the 45 per cent figure on its own as a "key finding", without ensuring what it does and doesn't mean about how white or British London is was understood. By separating them out, we can better understand what the 2011 census data actually tells us about London and how it is changing:

63 per cent of Londoners were born in Britain

The census shows that the population of London is 63 per cent British-born, with over one in three born abroad. This 63 per cent British-born; 37 per cent foreign-born" finding is a more accurate way to capture the scale of migration in London. This also shows the increased pace of migration more accurately: the London population was 27 per cent born-abroad in 2001, and it is now 37 per cent.

Making the "45 per cent white British" statistic the headline claim is to see the salient contrast as between "white Britons" and "ethnic minorities, immigrants and foreigners (as immigrants include both British citizens and foreign nationals). That would seem to depend on the outdated premise that non-white Britons, including those born here, are not viewed as being as authentically British as their white fellow citizens.

Fortunately, the idea that British identity depends on white ethnicity is regarded as a very un-British idea by very broad majorities white and non-white Britons alike. You will find very few people who think Jessica Ennis or Ian Wright are less British than they are, because they are mixed race or black rather than "white British".

The inference that a city which is less "white British" must be less British flies in the face of the well-established evidence that non-white Britons have, on average, a somewhat stronger sense of British identity and allegiance than white Britons. Major studies have repeatedly found this; and the media have repeatedly reported it as a surprising and counter-intuitive finding. 

The population of London is 60 per cent white

"White British" Londoners are now a plurality, rather than a majority. If anybody is interested in ethnicity, the "whiteness" of the capital city , then the census demonstrates that 60 per cent of those resident in London are white. There is a white majority in London once the ethnicity of the Irish and the Americans, the French and the Poles who live and work in the city is taken into account. None of Graham Norton or Terry Wogan, Rolf Harris or Kylie Minogue, Arsene Wenger or Ulrika Johnson are likely to have made any contribution to the white British census score.

Three-quarters of Londoners are British citizens

Of the third of Londoners born abroad, many have become British too. The "foreign-born" 33 per cent will also include some Londoners like Boris Johnson, who were British from birth, though born abroad, in New York in his case. (So the Mayor is included in the "white British" 45 per cent but not in the British-born 67 per cent. The children of soldiers posted abroad helped boost the German-born category to fifth non-British country of birth, for example). 

Others were not born British but chose to become British. Again, the British tradition is that all citizens count as fully and equally British, including those like Prince Phillip and Mo Farah who were born abroad. Across England and Wales as a whole, around a third of those born abroad have been here more than twenty years,arriving across the decades between 1950 and 1990. 

This census release reported that 24 per cent of Londoners hold non-British passports. However, this will also include some who are dual nationals, and who are British too. There is a promise to include in "subsequent releases from 2011 census ... a more complete indicator of migration status since, for example, British citizens can be born abroad and other people living in the UK who were born abroad can acquire British citizenship".

The census data published so far does not reveal the precise proportion of Londoners who are British citizens. It shows that over 70 per cent of Londoners hold a British passport, but the 8 per cent of Londoners who do not hold a passport will include many British citizens too. (This gives London the lowest proportion of non-passport holders in the UK, compared to 22 per cent in Wales). However, in the meantime, data does exist elsewhere. The findings from the 2011 Labour Force Survey data show that foreign citizens made up 19 per cent of the population of outer London, and 27 per cent of those in inner London. The University of Oxford Migration Observatory calculates that, overall, that would translate into 22 per cent of London residents being foreign nationals.

The census snapshot captures much temporary as well as permanent migration

The headline census figure that 7.5 million people resident in England and Wales were born abroad and that half arrived in the last decade. That reflects the historic rise in migration over the last decade, as every report has stressed. What has been seldom explained is how and why those raw figures will also tend to exaggerate the increase. 

The census is a "snapshot". It tells us about the usual residents of England and Wales on one night in March 2001. That snapshot approach means that it cannot easily convey one of the biggest changes in immigration patterns over the last decade: a sharp shift towards temporary rather than permanent migration.

We tend to think of the "Ellis Island model" of immigration: you arrive, with your suitcase, and settle for good. But the changes in travel and communications that have made migration easier have made it easier to go back too. 72 per cent of migrants to the UK now come for less than five years, as the Migration Observatory at the University of Oxford has reported. A majority of those classed as "long-term" migrants (here for more than 12 months) say they intend to stay for one or two years.

The census "snapshot" captures the scale of migration, but not this challenging new dynamic of increased churn.

While half of the foreign born-residents currently in England and Wales have arrived in the last ten years, most of them will not stay, while a proportion will settle and become British. Indeed, hundreds of thousands of those recorded in the census almost two years ago will already have gone; others have arrived, and again most will later leave, while a significant minority will settle, become British and see their children become "us" too.

Londoners shopping on Oxford Street. Photograph: Getty Images

Sunder Katwala is director of British Future and former general secretary of the Fabian Society.

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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?