We’re facing a national emergency. The Prime Minister and his entourage need to wake up
Whatever economic bollocks emerge from the EU, Downing Street and Federal Reserve spin machines, most thinking people have too much common sense to be taken in by it. Their grasp of reality has been vindicated in turn by the warnings of Ken Clarke and Mervyn King. But even those with real awareness of the mess haven’t yet grasped the far-reaching social effects of overlaying national debt upon existing personal debt.
‘The recession is over’ we keep being told, but this is the recession that exists among the graphs and minds of economists and accountants. The oxymoronic ‘jobless recovery’ line isn’t fooling many real people on either side of the Pond. In the US, fear of debt and/or unemployment rose from 43 to 49% over the last few months, and in Britain the confidence barometer has plummeted to -29. “In the 35 years since the index began, confidence has only slumped this much on six occasions, the last being in the midst of the 1992 recession,” said Nick Moon, managing director at GfK NOP Social Research.
Yet still the almost manic desire of government to put things in some kind of rosy light continues. On the OFT website at the moment, there is a bald, unsupported statement asserting that ‘There are an estimated 165,000 households in the UK using loan sharks’. Nothing surprises me any more about the OFT, but here’s the truth: the loan-shark ‘Yes’ brokers 20,000 loans a month. That’s 240,000 a year – and Yes only has 25% of the market. The real figure of troubled households using these low-life is nearly one million. But Yes actually gets 80,000 applications a month…so there are four million households who can’t get a loan at all through the ‘normal’ channels.
That’s 18% of all UK households. With three quarters of them unable to find tiding-over money already.
Now here’s some more stuff from Credit Action UK to make your neck-hair stand up higher. Forget the doomed four million for a few seconds, and think about people like us. Every day, a thousand people seek some form of formal debt rescheduling plan – and the average household debt is rising by just over £16 a month. That’s without interest rate rises.
Research from Abbey Savings suggest that 28% of households with young children have no savings or investments to use in times of difficulty. 31% of younger savers don’t think they have enough money to cope in an emergency. In real figures and allowing for double-counting, all up this equates to over 11 million homes. 55% of all UK households.
Turning to look at the employment prospects for all those kids armed with a media studies degree, there are a staggering 1.3 million UK citizens aged 16-24 not in employment, education or employment (the so-call NEETS) and this number – still growing – is at a record level. Research from Sainsbury’s Finance highlights that over half of undergraduate students (53%) in the UK are being given financial assistance by their parents to see them through the burdens of joblessness and University unpaid debt. So slightly more than, at best, 400,000 households are stumping up for at least one graduate.
Now let’s look at the older folks. The majority have little or no debt, but there are still 40% entirely dependent on the State Pension. With the 1945-49 baby boom about to join the pensioned population, the key group to analyse is that aged 50-60 since around 2007. According to a study conducted by PriceWaterhouseCoopers, people in this age group have been the most affected by the job losses and the falling values of their assets.
House prices have taken a dramatic hit, so the wrinklies have been stunned, now realising they will not have anything like as much money left from the sale as previously thought. In addition, pensions have been affected by the slump in the market and the reduction of profits on the stock market.
A lot of those aged 50-60 are serious pension savers – but running out of time to get a recovery in either the stock or housing market. In fact, The Slog (like many other thinkers) believes firmly that a major property correction is on the way – Halifax figures for January confirm this – and the stock market has almost certainly topped out prior to the second plunge – Crash2.
At the top end of those already retired, over 200,000 older people live in private retirement developments across the country, buying their properties under leasehold. But while on the face of it these developments offer people a ‘burden-free’ housing option, growing numbers of residents are living in fear of rising service charges and struggling to pay the increased costs. The truth is that fees and service charges are sky-rocketing.
Further down but still in the private sector, there are nearly 21,000 care homes in the UK, costing an average of £35-45,000 per annum per resident. The amount of money available for staff salaries, redecoration and heating shrinks with every year, and will be exacerbated by the recent oil-price spike. You will have to travel a long, long way to find a nice care home in that price range, and as demand increases year by year, the prices keep going up. With the children of these residents stuck with 0% interest on their savings to help rescue the banks, this is just one more basic element of life where push will come to shove before long: it’s going to become a problem shared by almost everyone with ageing relatives.
The last two Governments have offered no real solutions, because there aren’t any. State-run homes are almost non-existent, and the latest local government cuts will mean reductions in services for the elderly surviving at home. There are 700,000 UK citizens with dementia. With two children per case, one could guesstimate that 1 – 1.5 million households at or near the ’empty-nest’ stage are having to find a large five-figure sum every year.
I’d love to think the Coalition had a plan to deal with this, but trust me, it doesn’t. The likes of Ken Clarke are trying to get the need for one talked about, and I know that Iain Duncan-Smith raises the issue at almost every Cabinet session he attends. The two issues – how the welfare budget is going to cope with the ramifications of the data outlined above, and how the inevitable suffering might be alleviated – are at the bottom of the slush pile at the moment. This Too Difficult to Solve folder lies squashed under the weight of gung-ho plans for Libya, gilt yields, the derivatives market, the cuts getting nowhere, dealing with growing Union militancy, and making sure that Newscorp gets everything it wants.
The Coalition has been dealt some ghastly cards, and most of the short-term blame for the coming real austerity lies firmly with the bankers and New Labour over-spenders who put flash and news conference bollocks before real needs. But over the long-term, the lack of foresight about demographic trends (and the need to diversify our economy) have been pushed down the road by successive governments since the early 1970s. And of course, we cannot leave this subject without noting that the gold-pensioned Mandarins have given very little in the way of advice over that time. Arse-covering, vote-catching and mad greed have, together, hastened our arrival at this awful cliff-face.
But the disaster will be ten times worse than it need be if the current Government doesn’t realise that this is a national emergency – one to make Dunkirk look like a gentle regatta. I could’ve delved far more deeply into the knock-on tidal wave of effects that will result from rising interest rates and growing national debt repayments; but after a while with statistics, a sort of snow-blindness kicks in.
Were it to be my responsibility, I would instantly create an unemployed Youth Task Force to be trained and charged with providing free services to those in serious trouble – be that cooking, shopping, child-minding or anything else that might be required. Paying them the minimum wage to do this would be self-liquidating as an alternative to them being bored and on the dole. And I would also give Duncan-Smith a broader role as the man in charge of coordinating and alleviating the effects of economic lunacy in the past.
But none of that is going to happen, except perhaps in the form of some window-dressing. There is no plan about what to do, in the same way as George Osborne cannot get beyond vapid generalities on the subject of rebalancing the economy. Everyone in senior Coalition jobs right now is fire-fighting one day at a time; but it is the Prime Minister’s job to think further ahead – and Nick Clegg’s job to help him, given that he has nothing else of substance to do. As neither man excels in this role, I’d suggest that Dave gets new adviser Tim Luke on the case asap. He may be yet another Old Etonian chum of the PM, but the word from my US and City sources is that Mr Luke has both charm and skill in the making-it-happen department.