Cameron wants to reduce private debt - but when and how?

A rapid repayment of debt is a recipe for recession, not recovery.

According to reports this morning, David Cameron will use his conference speech this afternoon to call on Britain's households to pay down their debts. He will say that dealing with debt means not just paying down public debt but also "households - all of us - paying off the credit card and store card bills." Such comments would go beyond the government's existing argument about the importance of dealing with the public deficit to an argument that about reducing the UK's levels of personal debt.

What are we to make of this new message? In one sense it fits with the government's wider narrative of Britain having maxed out the nation's credit card. In this respect, Cameron's comments are a statement of the obvious, albeit an important one. The UK's household debt levels remain crushingly high both by historical and international standards. Sooner or later it's vital that they come down. The Prime Minister is also right to say that this was no ordinary recession, and that this will be no ordinary recovery.

But in another sense the comments are a dramatic and risky escalation of the government's argument on debt. That's because, although they fit the government's story, they run counter to the economic logic that underlies the current forecasts for UK recovery. As we pointed out earlier this year, the most recent forecasts from the Office Budget of Responsibility, published in March, say that the UK's stock of personal debt will rise, not fall, in the coming years - and not by a little but by a lot. The OBR projects that household debt will grow from £1.6 trillion in 2011 to £2.1 trillion in 2015, a rise from 160 percent of household disposable income to 175 percent. That growth is expected to sit alongside low savings, with the ratio of household saving to disposable income falling to roughly 3.5 percent - half its average over the past 50 years.

In the current economic climate, it's hard to overstate the importance of this difference of opinion over what will - or what should - happen to household debt. Put simply, the OBR's projections for growth rest on their forecasts for household consumption, which rest on their forecasts for household debt. If the OBR were to be proved wrong on debt - if it were to fall rather than rise - then their forecasts for consumption would presumably need to be downgraded, as would their forecasts for growth.

The following chart puts this is all into stark perspective. In all recent recessions in the UK, consumption growth had returned at this point, airlifting the economy to recovery. By contrast, today's trends in household consumption are a millstone around the neck of the economy.

Household consumption following the onset of recession
% fall in real total household consumption

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As well as running against OBR forecasts, the Prime Minister's message doesn't chime with the current reality of the household behaviour. Savings are currently falling not rising. The most recent data revealed that the household savings ratio had dipped from 5.1 to 4.6 percent. A recent poll carried out for the Resolution Foundation by ipsos MORI helped to explain why: almost half of all people on low-to-middle incomes now say they are running out of cash every month, and more than one in four say they're unable to make regular savings. People aren't overspending - they are reducing their savings just to stay afloat.

Of course, none of this is to deny that private debt must fall. The question is: when and how? Reducing the UK's stock of personal debt is likely to be a slow process. It needs to take place via a careful paying down of bills on the back of a recovery of real earnings, enabling families to save a bit more without immediate and dramatic reductions in consumption. The alternative option - a rapid repayment of debt at a time of falling incomes, fragile consumption, rapidly weakening export markets, and sharp public sector cuts - is a recipe for recession, not recovery. The Prime Minister should be careful what he wishes for.

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Diane Abbott tweeting the fake lesbian quote won’t detract from Theresa May’s gay rights record

The shadow home secretary tweeted a quote about lesbians which can’t be traced to the Prime Minister.

Diane Abbott has deleted her tweet of a quote that’s been whizzing around Twitter, supposedly attributed to Theresa May.

The meme suggests that the Prime Minister, when a councillor in Merton and Wimbledon in the Eighties, once said: “Curbing the promotion of lesbianism in Merton’s schools starts with girls having male role models in their lives.”


Twitter screengrab

But there is no evidence available to prove that May ever said this. The quotation was investigated by Gay Star News and BuzzFeed when it started being shared ahead of the election. Just like Dan Hannan's pictures from his country walk and erm, pretty much every pro-Leave politician suggesting the NHS would get £350m extra a week after Brexit, Abbott’s tweet was a bad idea. It’s good she deleted it.

However, this doesn’t take away from Theresa May’s poor track record on gay rights, which has been collated by PinkNews and others:

1998: She voted against reducing the age of consent for gay sex.

1999: She voted against equalising the age of consent, again.

2000: She voted against repealing Section 28, and Vice has uncovered an interview she did in her forties with a student paper when she said “most parents want the comfort of knowing Section 28 is there”, referring to the legislation stopping “the promotion of homosexuality in schools”.

2000: She did not show up to another vote on making the age of consent for gay people equal to the one for straight people.

2001: She voted against same-sex adoption.

2002: She voted against same-sex adoption, again.

2003: She did not vote on repealing Section 28.

2004: She missed all four votes on the gender recognition bill. (But she did vote in favour of civil partnerships this year).

2007: She missed a vote on protecting gay people from discrimination (the part of the Equality Act that would prevent b&bs and wedding cake makers discriminating against gay people, for example).

2008: She opposed IVF for same-sex couples, voting in favour of a child needing a “father and mother” before allowing a woman to have IVF treatment.

Since then, May has softened her stance on gay rights, apologised for her past voting record, and voted in favour of same-sex marriage. “I have changed my view. If those votes were taken today, I would take a different vote,” she said.

But your mole can think of at least one politician who’s always been on the right side of history regarding gay rights. Diane Abbott.

I'm a mole, innit.