In a double-header this weekend, The Slog asks how justified doom and gloom is in relation to the UK….and whether or not the Coalition is on the case, in denial….or privately deciding there’s little or nothing it can do.
An old friend and avid Slog reader finally caved in on Thursday, claiming an inability to read this column any more for fear of having to up the anti-depressant dose. This happens only rarely, and while I entirely understand his desire to hibernate until the storm has passed, I must as always point out that I don’t make this stuff up. Indeed, by describing our current national, personal and community demise in glass-half-empty terms, I am being relatively generous about it: such liquid as remains in the glass is dribbling away as I write – and the evidence for this is overwhelming.
Today however, I will try and put all key grounds for pessimism in one place (below); and then tomorrow, reach an informed view about whether the Coalition Government running Britain is on top of those issues.
What’s on our minds?
But first, what do electors currently think politicians ought to be worrying about? Yesterday, market research outfit Ipsos Mori published the latest in its rolling surveys of voter sentiment in general, and key anxieties and concerns in particular. In brief, the results show the worries in descending order of size as:
Concerns about the economy
fear of unemployment/personal finances
confusion and fear over the national deficit
education cuts and tuition fees
law and order/dishonesty
None of the above is worthy of a banner headline, although one fascinating feature of the study at its focus group level is the role of the EU: resentment of it and worries about it in the context of the other dimensions, eg “If we’re hard up, why are we giving all this money to the EU?” and worries about EU-implosion contagion hitting the UK.
Today’s analysis is going to have a look at whether their fears are justified. Tomorrow (with luck) I’ll be able to provide some horse’s mouth on the Coalition’s view on how these issues should be tackled….if at all.
This week gone, an interesting insight about UK personal indebtedness came across my desk, in the shape of complaints about the loan provider ‘Yes’. The company brokers around 80,000 loan applications a month, but only finds loans for 20,000. So when you think about it, the company should really be called No. And there’s a hefty non-returnable fee of £69.99. In case you don’t hate them enough already, they tell you over the phone that they want your credit card details for ID purposes; but the boss (hysterically, his name is Gordon Bron, which is too close for comfort) fessed up this week to wanting the details to shovel the seventy Pounds out of those 75% of unlucky folks silly enough to talk to them.
This means of course that, by ringing the company, their debt problems just got worse. But for a stats anorak like me, it means something much more disturbing: 80,000 applicants a month is roughly a million a year….and this is just one loan shark. The five big players in the loan-shark sector cajole 2 million Brits a year into paying interest rates starting at 177%…but the average turn-down rate is, again, between 70 and 80%.
On that basis, somewhere between 5 and 8 million UK citizens are strapped enough to be talking to loan sharks. And of those, around 5 million are even turned down by that form of lender.
Or – put another way – around 1 in 5 adults of working age in Britain needs a loan shark to get by. And this is before any mortgage interest rates appear over the horizon….as even the schizophrenic Bank of England now admits they must. In its report of yesterday, the Bank warned that over 60% of mortgagees – equivalent to circa 7 million homeowners– are not on fixed rate home loans.
The economy and banking debt
While separating dimensions of anxiety for research purposes is necessary, in the real world, economic outlook, fiscal debt, unemployment, inflation and even bank balance sheets are rolled around the human brain like a misshapen aneurysm. And last week, the news was pretty dire: not just rapidly rising unemployment, but some uncomfortably large inflation rates on food and clothing. During the last few days, it has also become clear (see endless Slog posts during 2010) that a further £80billion of bad loan debt has appeared in the banking system’s liabilities – over and above all the money they still owe you and me.
On top of that updated toxicity, UK banks (RBS, Lloyds, Barclays and HSBC) have a £210bn exposure to Spanish and Irish debt – about 75% of our total banking capital. Another £288bn is in German and French debt, which must suffer if the eurozone crisis keeps on being denied, obfuscated but above all, not tackled. According to the National Audit Office, the taxpayer is coughing up £1.5billion per annum just servicing the debt on bailouts already in place. Next year, these banks will have to pay their creditors over twice what they managed to do in 2010. All up, they still owe us (the taxpayers) nearly £600 billion.
They are in turn to be asked on December 29th to transfer their share of the ECB recapitalisation predicted by The Slog earlier this week. In essence, our liability for this is chickenfeed; but the need for the EU to do it in the first place provides a worrying segue into the danger of eurozone implosion per se.
Euro confusion and disarray
The European debt crisis has been caused by several long and short term factors.
In brief, these are French insistence on a single currency without a single fiscal management code in place; the ECB’s lax lending policies to member States; lies told to Brussels by at least one of those States; amoral targeting by Hedge Funds; and appallingly patronising, cack-handed crisis management by everyone from France’s Christine Lagarde via the ECB boss Trichet through to Frau Merkel.
The two surreal Council statements put out during the past week were straight out of Animal Farm; but by Friday evening it was obvious to even the most bullish bond punter that Angela Merkel hasn’t budged a centimetre on the bailout fund: it is what it is, period.
From here on, technical management of bailouts and other assorted sovereign debt problems will be handled thus: the ECB will up – perhaps double – its policy of buying dud bond assets (having said two months it would do no more at all), and the EFSF will use what it has – around 700 billion euros – to provide loan help as required. The market’s main players see these as, respectively, rebranded QE, and nowhere near enough.
Britain’s sovereign indebtedness
The parlous state of our biggest trading partner in turn affects the issue of British indebtedness as a State. In George Osborne’s first round of cuts, he claimed to have made £6.2billion of savings on ‘wasteful’ government practice. Then in his October Budget presentation, the Chancellor spread before us just over £80billion of cuts to be introduced between 2011 and 2015. Between May and October, a further £18 billion of cuts were announced in relation to Welfare and Health. So keeping it simple, the Coalition hopes by 2015 to have eliminated the annual deficit at a cost of some £100 billion.
Staying in the EU will cost us (without bailouts) £120 billion per year. Not only will that wipe out the cuts, over four years it will increase the national debt – everything we owe to everyone – by at least £360 billion. This assumes that zero interest/low bond yields will be readily available (they won’t) and that the EU disaster doesn’t produce a Tsunami of market nerves for us too (it almost certainly will).
The Establishment prefers to talk about ‘deficit’ (annual losses) rather than ‘national debt’ (the whole kit and caboodle) because the figures are less terrifying. Although smart-alecs throughout the financial media, the Government and Whitehall try desperately hard to say “it all depends on how you look at it”, the stark reality is that it doesn’t. This is because the credit and currency markets make their judgements in consistent ways. They will look at credit record, economic growth, currency stability, government action, type of debt, and the output/debt total relationship in coming to a verdict.
In the UK’s favour is a triple A credit history, determined Coalition cutting, and the longer-term nature of most bond liabilities. Held against us are poor economic growth, endemic inflation, consistent trade gap, proximity to the EU, and the sheer size of the total debt.
Give or take a billion, we owe roughly £940 billion at the moment. We aren’t keeping up with the payments – the Government expects the debt to grow to £1.1 trillion in 2011 – and even this figure is nowhere near the total liabilities of UK plc: Sir Humphrey pensions alone would bring the number to £2.3 trillion. The interest paid on the Debt is £43 billion per annum, and the size of the annual deficit is £156 billion.
One gets number-blindness after a while, so I suggest you think of it like this.
Mr & Mrs Britain have a house on which they owe a million pounds. The cost of servicing the mortgage is about to go up. The land they use at the back to grow stuff has just had 300 gallons of toxic waste spilt on it, so they need to think of something else to do for a living. Mr & Mrs W also employ people to farm and crop market their field, but they owe them £1.3 million too. They also have to pay aged relative care home fees of £150,000 a year. Each year for the last five, the couple have made a business loss of around 5%.
Mr Britain has persuaded his gullible Sino-Arab Bank that he will cut his outgoings by roughly13%, and use his bicycle to go out and get a highly paid job doing something different – he’s not sure what exactly. The Sino-Arab Bank is mulling this over, but what Mr Britain hasn’t yet told them is that Mrs B is pregnant, and they just found dry rot in the cellar….where they keep all the cash savings, which have consequently gone mouldy. And a week ago, the Unite family moved in across the road. An infamously ASBO-rich brood, the Unites have already thrown a brick through the Britains’ window, and are threatening further criminal damage unless they get paid protection money.
Education and Immigration
Recognising all that, worries about University tuition fees are largely unfounded. As we posted a few days back, much of the Leninspart Guardian drivel about ‘trebled fees’ is a fantasy. What worries The Slog is that the underlying problem – the insane belief that half of our Yoof are University material – has not been addressed at all.
Either way, it is fairly safe to assert that the Government was bamboozled and outflanked by a well-organised programme of mendacious protest from the Left.
As regards the immigration question, this has been discussed and quantified forever and a day; the reality is that Britain is struggling to support the population it has – and the answer to skill shortages must be to train people who are already here and unemployed – not import foreigners (and their families) to fill the gaps. To those who say “But as members of the EU….” I say only “Correct: all the more reason not to be”.
Somehow, that pesky Eurozone neighbour keeps on cropping up as a factor.
Law, the Police, and the Justice System
Between 1995 and 2009, according to the Justice Department, the prison population in England and Wales grew by 32,500 – an increase of 66%. The reasons are interconnected: crime got nastier and more violent – and so sentences got more severe. The statistics show quite clearly that violence against the person (VATP) and drugs have had
a massive impact on the prison population’s makeup and size. Further, the rate of increase in the prison population was just under 50% higher from 1995 to 2009 compared to the increase rate average from 1945 -95.
So regardless of what liberals would have you believe, crime – especially violent crime – grew like topsy under New Labour. When Gordon Brown kept on repeating that Labour had halved crime, it was as true as most other things he uttered viz, at best a fraction of the real story. What happened was that over the period 1995 to 2009, recorded crime fell by 45% – but (a) nearly all of it was ‘redundant’ crime eg muggings, (b) huge numbers of the public stopped bothering to report petty thefts from house or car; and (c) ID theft, internet crime and financial fraud grew many times over. ID theft, for example, replaced mugging (easier, safer and more lucrative) as did violent organised drug crime when that trade became more deeply ingrained in society. As recent press reports have shown only too painfully, the changed technology of crime has left our police force untutored and ill-equipped to even understand it, let alone deal with it.
Those desiring to put prison population growth down to more things becoming unlawful won’t find any comfort in the Justice Department data. ‘New’ offences account for under 3% of the total additional prison population. Further – as The Slog has always maintained – prison as a form of punishment has been an abject failure: if a 61% average reoffending rate throughout the period doesn’t convince people of that, then nothing ever will.
The police force itself comes out badly from the statistics available. Detections per officer have fallen: in 2003/04 each officer was detecting 10.2 offences a year, but by 2009 that was just 9.4 offences per officer. This was reflected in declining public satisfaction with the police service. The proportion of the public saying that the police do a ‘good or excellent job’ fell from 64% in 1996 to 53% in 2008/09. Nearly half of us don’t trust the boys in blue – and don’t think they act as much of a crime deterrent. The service is made up of 43 forces, most of which are too large to provide responsive local policing. However, there is Government pressure for further mergers; and, of course, under the Osborne cuts, an already demotivated and under-resourced service will have 18% less money at its disposal.
A big rise has been seen in the complaint that the police are ‘unwilling to attend reported crime scenes’, and even more that they are ‘unwilling to prosecute’. Slog and nby veterans will know that much of 2006-7 was spent on this subject in relation to my own local Force here in Devon. In 2008, several police sources recounted to me their assurance that the fault lay with the Crime Prosecution Service (CPS) which, they alleged, was being starved of funds – and thus only willing to prosecute cases where the outcome was ‘a sure thing’.
The CPS too is facing a further 13% cut in budgets, but the data to hand support police anecdotes about the CPS’s conservatism on advancing prosecutions. From a 23% rate of defendant acquittals in 2002, the figure slumped dramatically to 14% in 2008, an outcome the CPS laughably refers to as ‘positive’. The conclusion is risible in the light of another alarming statistic: that those defendants who plead not guilty and go to trial represent under 4% of all convictions. Clearly, the CPS has massaged its performance by ignoring a huge proportion of crime in favour of only ever backing 50-1 on favourites. In the cynical world of official numbers, however, there is nothing remarkable in this behaviour.
Much of the foregoing analysis is really an overall condemnation of Britain’s decline both as a culture and a trading entity. Its starting point – the loan skark Yes – is tragically typical of an ethos of omission and cheating that pervades much of Britain’s domestic marketing and retail sectors today. In just the first four years after semi-retiring in 2000, my wife and I lost £50,000 in a mis-selling bond scam, got screwed by crooked solicitors on a land purchase, defrauded and then threatened by a major ISP, and infamously fell victim to ID crime. Not only were all ‘the authorities’ less than useless, it became clear as time passed that our experiences were entirely normal. Since then we have had run-ins with car dealerships, software suppliers, pc consultants and a host of other reptiles, culminating in a Slog client suffering gbh at the hands of a serial fraudster. Not only did both the police and the OFT sit on their hands while the frauds continued, the unwillingness of Plod to prosecute the eventual assault was as disgraceful as it was a cause for deep dismay. Despite this same gargoyle threatening me twice over the internet (the standard required for a charge of abuse) the police also refused to prosecute in that case either.
Acceptance of such mired values and standards is what marks the end of civilisation. Usually, it runs alongside mercantile failure, and as a fading Empire the UK is performing precisely to historical type. For over forty years now (I mark the turning point at about 1966) we have indulged ourselves in comparative relativism, gaining reassurance that we are not yet ‘as bad as’ first France, then Spain, Italy, Greece….and ever onwards down towards a swamp of corrupt stagnation. Our national soccer team now regards victory over Andorra as a subject for self-congratulation and alcoholic indulgence…and a reason to get angry when fans boo their hopelessly insufficient technical ability.
Unfortunately for us as Britons, this decline and fall is being exacerbated by the greatest change in global economic balance we have ever seen – and the worst banking crash in history. It seems obvious to those who have studied history, science, medicine and economics thoroughly that we are on the verge of a qualitative step-change as a species. This does not, on the whole, seem to be reflected in the level of media and political debate in the West in general, and the UK in particular. Much of that too is down to horribly downgraded education (a subject itself for denial until relatively recently) and the rise and rise of ratings and shareholder returns as the only criteria in televisual content – be that in cinemas, on the pc screen, or at TV stations around the globe.
Frustrated over the summer as to what (if anything) the internet might achieve in arresting or even reversing this descent into a one-shade, undiscriminating culture, The Slog set up a number of sessions with senior British politicians, administrators and commentators currently in or on the fringes of Government today.
It won’t change your life. But I suspect it will confirm and amplify some of your worst suspicions.