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Veronika Thiel is a researcher and project manager on nef’s Access to Finance team.
As a social scientist, I am predisposed to like surveys. But sometimes, you do wonder about their merit. Sometimes, they just state the obvious. The Financial Times and the BBC, among other media outlets, reported on a new survey by the Bank of England that showed that high-income households are struggling with their debt, especially unsecured lending, such as overdrafts and credit cards.
*Yawn* Oh, really? I do apologise if the sarcasm won’t travel in this blog as much as I’d like it to, but common decency prevents me from using more obvious similes here.
Of course, richer people will also struggle with debt. Given the level of consumer debt in this country, that’s hardly a surprise. We are at the beginning of a recession, inflation is up, and the heyday of easy credit that allowed people to fund a big-spender lifestyle is over. It was only a matter of time.
The only news is that this now affects the upper income classes as well. The first signs of the crisis, however, appeared much earlier. Personal insolvencies have shot up dramatically since 2003, as the graph based on Government data below shows.
The fact that individual insolvencies were up despite the easy availability of credit, and that they are a measure of last resort, should have rung alarm bells back then. But it didn’t, at least not in the right places.
So many households have struggled with debt for a long time, especially those without access to cheap credit from banks. For them, the credit crunch has been happening for a long time. They had no choice but to pay for essential goods such as a new fridge or a boiler by using a doorstep lenders, who charge often around 250% APR. Other households will have to go down this route now as well.
So while I have sympathy with those wealthy people who are now finding themselves in unexpected hardship, let’s not forget that for many much poorer people this has long been a reality.
In an ideal world, the newspaper headlines wouldn’t simply tell us what we already know. They’d give us some real news, such as: we need to stop funding our lives with credit, and we need to start a discussion on living wages and benefits. Now if I found a survey that suggested this as an outcome, I’d be all ears again.
Andy Wimbush is nef‘s Communications Assistant and blogmaster.
If you hoped that the recession might buy us some time to combat climate change, you’re likely to be disappointed. That’s according to figures from the UK’s Committee for Climate Change which predict that even a serious fall in GDP would only deliver a fraction of emissions reductions. The Guardian has the full story here, including some perspectives from nef‘s Policy Director Andrew Simms. Andrew explains:
There’s a strong lockstep between GDP and emissions. You wouldn’t get more than a 1% change in emissions unless you had something really dramatic happening, like closing a whole industry down… Because of the recession, perversely, fuel prices have gone down a lot and that might cancel out some of the savings expected in that sector.
Of course, nef doesn’t expect back-to-business-as-usual to solve the climate crisis either. Take a look at some our most recent publications on the way out of recession and ecological mayhem:
- From the Ashes of the Crash: 20 first steps from new economics to rebuild a better economy
- A Green New Deal: Joined-up policies to solve the triple crunch of the credit crisis, climate change and high oil prices
- Triple Crunch: Joined-up solutions to financial chaos, oil decline and climate change to transform the economy
And if you haven’t already, be sure to read ‘Paradigm reclaimed‘, Stephen Spratt’s blog post about how to build a better banking system.
Lindsay Mackie is a consultant at nef. She is leading nef’s post office campaign and works on Clone Town and Ghost Town Britain.
Rather than swallowing the leaks so helpfully spouted by the government at the weekend about the vast pension deficit at Royal Mail, we should step back and actually look at what Richard Hooper’s review of postal services was asked to do. It was asked to:
- Assess the impact of liberalisation (de-regulation) on the UK postal services market;
- Explore trends in future market development;
- Consider how to maintain the Universal Service Obligation (delivering mail from John O’Groats to Land’s End and everywhere in between).
In its interim review in May this year Hooper said some extremely interesting things. It found that there have been “no significant benefits from liberalisation for smaller businesses and domestic consumers. They believe that Royal Mail’s service offers good value for money as it stands”.
It also found that there was a risk that more extensive competition could make the universal service unsustainable. And it declared that competition had focused on price and there had been less innovation (the mantra of free marketers) across the sector than might have been expected.
It found that the number of letters we write was decreasing annually, but that we are sending a lot more parcels. It found that Royal Mail had been good at cutting costs (£1.5bn) and staff (48,000) in recent years.
Read it properly and the Hooper Review is tells us what almost certainly won’t be leaked – that we have a Royal Mail which does a lot of things pretty well. It is popular with small and medium-size businesses – over 80% of the dynamic small businesses working on the front line of the economy would have to take drastic action if they were left without the Post Office service. Privatisation has benefited some large companies but has damaged Royal Mail and has not led to innovation.
The real problem is that the Hooper review was asked to do the wrong things. What the government should, on our behalf, want to know is how to grow and strengthen this great national service now and for the future. What are the services which the network could provide for the public good? How can it contribute to greater economic stability? How can the network of local post offices be used to contribute to the government’s climate change targets? How can the deficiencies of the current banking system, so woefully exposed by the gathering economic storm, be repaired and made fit for purpose by the financial possibilities of an expanded Post Office bank?
The current crisis must mean that any talk of further privatisation of Royal Mail services is dead. It should mean that the Post Office regulator, Postcomm, which has given barking mad advice about de-merging the Post Office from Royal Mail in the interests of liberalisation which has delivered very few benefits to very few big companies, is shown the door.
The crisis must also mean that we design and build the kind of Royal Mail we need – a national service which allows the local Post Office network to grow, which attracts much more government business, and which is built for the future resilience of all our communities. As the government musters the resources needed to weather the economic storm, it would be sheer madness to run down a major national network, sitting waiting for a major national role.
Now is the time to seize the initiative and restore stability by reimagining a post office network that is fit for the future. We mustn’t be softened up by leaks which may well be intended to prepare us for a weakened Royal Mail rather than the strengthened service we so clearly need.
Andrew Simms is nef‘s Policy Director and head of nef’s Climate Change programme.
A letter to the Observer, 14th December 2008.
We are gravely concerned at the behaviour of energy companies who are refusing to pass on price cuts to consumers, in spite of the sharp falls in the world price of crude oil.
Average annual spending on energy per household has breached £1,200. Since 2000, gas prices have risen 100 per cent and electricity 61 per cent. Correspondingly, energy providers’ profits have risen from £557m in 2003 to over £5bn today. Similarly, oil companies have announced huge windfall profits.
The record price rises coupled with the refusal of companies to pass on cost cuts could increase those in fuel poverty beyond six million. While the government’s energy package of long-term measures worth £900m over three years is welcome, this won’t go far enough to end fuel poverty.
In 2008 the inflated price of energy continues to make massive unearned profits for providers. We urge government to introduce a new windfall tax if these companies continue to refuse to pass on their cost cuts to consumers. Revenues from any windfall tax should be targeted at homes in fuel poverty to give them immediate help and should also be used to start a programme of home insulation to protect people from future price rises.
Gavin Hayes Compass; Neal Lawson Compass; Chuka Umunna Labour PPC Streatham; Jon Cruddas MP; Kate Hoey MP; Fabian Hamilton MP; Clive Betts MP; Mark Donne Fair Pay Network; Andrew Simms nef; Prof Ruth Lister CBE; Roger Berry MP; Sir Steve Bullock Mayor of Lewisham; Prof Sally Ruane; Richard Murphy Tax Justice Network UK
Josh Ryan-Collins is a researcher in the Connected Economies team at nef.
Oh to be a fly on the wall when Gordon Brown and Alistair Darling haul the big banks in to Downing Street, demanding to know why interest rate cuts are not being passed on to small businesses and homeowners. The press, not least the tabloids, have jumped on the ‘blame the banks’ bandwagon with relish.
But as we have seen since September, there is little national governments can do to encourage lending when the Banks are locked in to a global credit crunch with plenty more steam in its engine. The reality is that these behemoth banks, through successive rounds of deregulation and mergers, are no longer structured in a way that properly serves the needs of local communities and businesses. They weren’t doing much of a job even before the crunch, making their money not through careful loans to local businesses they knew and understood but through investment in the speculative markets of high finance and consumer loans.
But as recession looms, community banking is making a come back. In the last two weeks, Essex County Council and the City of Birmingham local authorities’ have announced plans for local banks. Their aim will be to lend public money at reasonable rates to cash strapped small businesses and homeowners in their areas. What a wonderful idea.
Essex has been inspired by the successful lending models of small regional banks in the US, including its namesake across the Atlantic based in Virginia. Importantly, legislation – the Community Reinvestment Act – in the US requires banks to disclose where and to whom they lend in their local community. Compliance with this act is part of the bank licensing requirements, and it also exerts public pressure if they are failing to invest in local communities. As nef has argued in a recent report, similar legislation should be created for the UK.
Meanwhile, Birmingham City council, the UK’s largest local authority, is planning to create a bank to lend up to £200m to small businesses, as reported in the Financial Times. The Bank of Birmingham (AKA BoB), which had its first incarnation in 1916 when Neville Chamberlain was the Mayor of Birmingham, will apparently also take retail deposits.
nef has been making the case for community banking for some years and is currently involved in developing Community Banking structures with Local Authorities and other partners in mid-Wales, Merseyside, London, the Midlands and Somerset.
A secure and stable economy requires a diversity of local and regional financial institutions, none of which will be too big to fail but all of which will be small enough to care about their local economies. Essex and Birmingham have shown the way, now lets hope others, including perhaps the post offices, will follow.
Andy Wimbush is nef‘s Communications Assistant and blogmaster.
A few picks from the web.
The Guardian has just put up a fantastic Carbon Atlas, which represents countries by the size of their emissions. It’s a very effective way of making the stats accessible – and astounding. Compare the United States with one our favourite little countries here at nef, the kingdom of Bhutan.
The Green New Deal is gathering endorsements so quickly that my regular round-ups can barely keep up. The lastest one comes from the International Energy Association. It’s worth bearing in mind that the IEA have been notoriously sceptical of peak oil. Getting their backing on this cause is therefore especially significant. The IEA’s Energy Director, Nobuo Tanaka, said:
The current volatility in global energy markets and the broader economic slowdown must not push us off-track from our efforts to address climate change. We must put in place the framework that will guide investment during the recovery and we must start the green infrastructure that will enable the sustainable economy going forward. We think there is an enormous opportunity to develop a ‘Clean Energy New Deal’ to achieve energy security, economic and environmental goals.
The Independent has a fascinating article about an ancient fertilization technique used by pre-Columbian Amazonian tribes which might help us sequester carbon dioxide. The idea is to grow thousands of trees, turn them into something called biochar and then bury it in the ground. The carbon dioxide take in by the trees will then be safely stored for thousands of years, improving soil quality in the meantime. And if you think that sounds like a dubious geoengineering or off-setting fix, consider that Professor James Hansen – godfather of climate science – is supporting the idea as a means of getting us back to the safety zone of 350 parts per million of carbon dioxide in the atmosphere.
Finally, a video from timetolead.eu. Watch and then sign the petition.
Andy Wimbush is nef‘s Communications Assistant and blogmaster.
… and probably George’s too. Watch Monbiot grill various high-powered business people and bureaucrats on their green credentials in this series of videos from the Guardian. First up is Yvo de Boer, the UN’s leading climate official:
Meanwhile, Saint George continues to plug the Green New Deal, recommending it – along with Transition Towns – as one of the few positive stories which climate activists have at their disposal.
Lindsay Mackie is a consultant at nef. She is leading nef’s post office campaign and works on Clone Town and Ghost Town Britain.
The headlines are enough to make us punch drunk: Lehman Brothers goes under, the Government owns a whack of our banking system, the US lost 1.25 million jobs in the last quarter, we’re heading for a no interest economy and so on.
But there is a piece of news today that is up there with those breath-catching facts. It’s in the Financial Times:
Fears for the future of some of the largest US metropolitan newspapers are escalating after reports that Tribune, the owner of the Chicago Tribune and Los Angeles Times, has begun preparations for a possible bankruptcy filing.The group, which has been in negotiations with banks in the hope of renegotiating its $12bn debt burden, did not return calls, but told its Chicago flagship: “It’s an uncertain and difficult environment. We haven’t made any decision. We’re looking at all of our options.
The Tribune Group was bought for $8.2 bn last year by a Chicago millionaire called Sam Zell. According to the FT, he quickly ran into trouble because of falling newspaper revenues and the tightening credit market. He has a huge debt to service and newspapers aren’t the best way to do that, on account of they are, by and large, losing readers, advertising and options very fast. Read the rest of this entry »