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.