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| To Salvage a Nation and Its Economy |
| The gap between rhetoric and reality in modern Britain |
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John Patrick Boland (JohnBoland)  |
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Published 2008-11-01 14:09 (KST) |
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The high end of the UK economy appears to have been at least temporarily soothed. The London Stock Exchange and the Square Mile might sleep easier each night now that trading is apparently a little less volatile. Yet, it remains uncertain as to how far the British economy has begun to emerge from the debris and carnage of the Credit Crunch.
The primary reason for this remains the fact that some of the fundamental issues remain largely unaddressed by our contemporary masters of spin -- the politicians and officials tasked with leading us out of the current financial devastation.
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FROM THE SECTION |
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| A troublesome legacy of the modern era of politics and public behaviour has been the emergence of a vacuous and "empty" society that seeks instant gratification, satisfaction and assurance--- without really delving too much into the thorny issue of detail. This lack of attention to detail has myriad and continuing consequences.
For example, the current crisis has its origins in greedy bankers overlooking the devil in the detail regarding credit swaps and derivatives and other exotic sounding financial instruments that we now know were never going to stand up to proper scrutiny. But hey it sounded good at the time ...
Similarly, the current lack of exact detail emanating from politicians providing a comprehensive outline of solutions to our fundamental economic challenges should prove equally perturbing. It sounds good to hear our politicians come out and say that everything is going to be fine but it is worrying that a significant number of people will take this at face value without probing further.
This is because a quick delve into the heart of the matter indicates that there are more serious deficiencies within the British economic system than many are currently aware of - or perhaps they choose to try and avoid focusing on the harsh realities of the current lack of alignment within British society and its economy.
According to the Land Registry of England and Wales, the average cost of a house in the UK stood at ï¿¡219,262 (US$359,367) as of August 2008. The most readily available figures for current average earnings in the UK come from the Annual Survey of Hours and Earnings (ASHE). The report for 2007 indicated an average annual salary of ï¿¡24,908 ($40,823). Care must be taken with generalisations yet a quick division of these figures reveals that average house prices in Britain are possibly as much as 8.8 times the average annual salary.
This chasm between actual earnings and the cost of most people's most significant lifetime purchase is arguably wider than it has ever been. Yet, as with anything, this in isolation may not have been an overwhelming problem. When it is combined with a series of other "charges" on an individual's disposable income the outlook suddenly changes.
Credit Action, a national money education charity, has just released its current debt figures for October 2008 and reveals that the average consumer debt held on credit cards, motor finance deals and unsecured personal loans now stands at ï¿¡4,845 ($7,950) per average UK adult.
Worryingly, the servicing of this kind of debt has emerged as a major challenge for many - "the proportion of people spending over 30 percent of their monthly income on unsecured debt re-payments has doubled over the past year to 14 percent." Quite fearfully, there has also been a significant rise in the percentage of people using over half of their monthly income to service unsecured debts.
With this information in mind let's return to those greedy and irresponsible bankers with a question - what happens when the ordinary people at the lower end of the economy start to struggle? Well, there's an entry on a bank's annual financial reports that falls under the heading "Write-offs and Bad Debts" - keep your eyes on forthcoming annual reports having a significantly larger figure under this column in the very near future.
In many respects, Britain as a nation has been living well beyond its means for many years yet the economic boom continued unchecked and unhindered by growing whispers that all was not quite as it seemed. In fact, our politicians encouraged the good times and never hinted that things might come to a crashing halt - it is uncertain as to whether this was due to naivety, arrogance, incompetence, a supreme and overriding belief that this time it would be different. Of course, that is now a moot point as the swirl of economic insecurity is here now and it is a very real concern for many British citizens.
The concerns engulf vast swathes and sections of society - from young to old, from skilled graduates to traders and those with a trade, from those close to retirement and those who are decades away from it. Each group bears witness to subtle differences in the scale and scope of their economic concerns yet the feelings of frustration are comparable across all the groups involved.
Consider the lot of the "Ipod" generation - the group of under-35s referred to as such by the think-tank Reform because they are "Insecure, Pressured, Overtaxed and Debt-ridden." Individual financial responsibility is critical yet this is a generation that arguably started with a deficit over which they had no influence. Any graduate that is part of the "Ipod" generation has been introduced to university debt by politicians that gained their own degrees at no financial cost in terms of fees and loans. The "Ipod" generation has also had to contend with spiralling housing prices as they seek to take the next step in life.
According to Reform, the "Ipod" generation also face the prospect of the increasing burden of paying for the welfare state "without being able to expect many of the benefits" - the current high levels of taxation (both direct and indirect) are such that they preclude the possibility of even the most prudent young saver being able to make healthy plans for their long term future.
Yet, things appear to be just as challenging at the other end of the scale. Age Concern reports that more than half of older people are having to cut back on many essentials, By essentials they mean food and heating - the fact that this is occurring in a country that claims to be at the forefront of the developed world is nothing short of astonishing and frightening. Help The Aged provides an online fact-sheet that indicates there are 2.5 million pensioners that actually live below the poverty line.
Prime Minister Gordon Brown and his Chancellor of the Exchequer Alistair Darling continually state that they will do whatever it takes to help the British people through this challenging period yet the rhetoric does not match with definitive action on a regular basis.
They may have temporarily addressed issues at the high end of the economy but the worries remain that as economic difficulty permeates the "real" economy that all sectors and elements of the UK economy will suffer - and suffer on a far greater scale than our current woes.
It is very difficult to trace or establish exactly what kind of tangible help has been offered to some of the key demographics within the UK population. The government consistently states it will create the conditions that will get the economy moving again - to do that requires some method of getting people to spend again. Is the government going to offer wide ranging tax cuts to release the squeeze on incomes currently being experienced? Is the government going to increase lowly pension payments to lift pensioners out of growing poverty?
The answer to that is probably no and may partly be due to the fact that the government will be unable to do this in a climate where unemployment is rising. The tax-take is falling at a time when benefit claims are rising thus putting more pressure on government expenditure.
However, this arguably exposes further the folly of bailing out UK banks to the tune of ï¿¡50 billion ($82 billion) - especially as the leading banks seem to be dragging their feet over implementing the desired changes that were allegedly a condition of this rescue package.
Recent trends indicate that the prolonged crisis within the banking industry is still having a major impact - the Bank of England's Financial Stability Report advises that UK banks are still severely curtailing their levels of lending in a trend that is likely to persist over the coming months. It is somewhat ironic that one of the key planks of the government rescue package was for banks to swiftly return to the higher levels of lending seen in 2007.
Historical events prove that you can only ignore the ordinary people for so long before they finally break. As we head toward Christmas the pressures on ordinary people in the UK remain significant. Temporary respite has come in the token shape of falling petrol and diesel prices - yet even this did not stop oil giants Royal Dutch Shell recording a 71 percent jump in its recent third quarter profits between July and September 2008.
However, the broader picture is of one of graduates and grandmothers, schoolteachers and secretaries, managers and the managed all facing continuing economic uncertainty and unsure of the kind of help they should expect or feel they deserve from their government.
The prospect of the UK banking system failing or totally disintegrating was undoubtedly dangerous -- yet the cost to the ordinary British citizen of saving it currently seems disproportionate to the tangible benefits being seen.
The ï¿¡50 billion ($82 billion) spent on salvaging the wreckage of the UK banking system is a huge amount of money. Would it not have been better spent funding a dramatic increase in the winter fuel allowances for Britain's elderly citizens? Would it not have been better spent funding even a temporary 2-3 percent tax cut for the huge numbers of people who earn less than ï¿¡25,000 ($41,000) a year?
These are some questions that should be directed at our leading politicians. In a disconcerting reflection of the vacuous sound-bite culture that we seem to live in they would probably come up with something that sounds encouraging but ultimately lacks substance. As we all know the devil is in the detail.
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©2008 OhmyNews
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