The personal debt bubble is fit to burst

We're almost in Wongaland already, writes Carl Packman.

Back in March 2012 the Office for Budget Responsibility (OBR) at least entertained the notion that economic growth would come from places other than an increase in household debt. Exports, investment, the lot. Today it doesn't bother, the consumer will have to go this alone, even with bank lending squeezed and wages left wanting. 

Even George Osborne, during his Mais Lecture in February 2010, offered us this gem: “The overhang of private debt in our banking system and our households weigh heavy on future prosperity”. How right he was, but his response was to lead us down the “road to Wongaland”. 

Despite the optimism of low interest rates, at least until unemployment rates are sorted out, critics have pointed out that Mark Carney's calls are really just a return to days where recovery will be fuelled by consumption and rising debt – as if we need more of that. 

Sure, people are returning to the shops, no doubt spurred on by the shiny weather, which is great for the economy, but what is the real upshot? Wages are falling in real terms and household debt is 153 per cent of GDP. On average each household in the UK is bagged with nearly £8000 in unsecured debt. Is the hope that we will get into more debt the only tool in the bag for economic growth?

Of course we should remind ourselves who the real winners are. Last year PwC said that credit cards were suffering a “mid-life” crisis as borrowers were using them less and taking out unsecured loans at a much faster rate. We're being told to spend more but we cannot afford to? The winners: who else but payday lenders.

In 2009, during the economic crisis, the payday lending industry was worth £900m. A mere four years later and the industry is worth over £2bn. One well-known player in the industry, The Money Shop, had 34 staff and a turnover of £2.9m in 1998, today with 2,300 staff their income is £172.3m. 

Not long ago the economist Tim Harford tried to allay our fears and said that compared to other forms of consumer credit lending the payday lending industry was relatively small and not to be worried about. But their rapid growth from an industry worth a measly £100m in 2004 should be better noted.

The industry is small in comparison but is growing at a far more accelerated rate than its mainstream counterparts. CityWire recently estimated that more than half (52 per cent) of new consumer credit loans are being made by "other" banking institutions and non-banks including non-standard mortgage lenders and sub-prime lenders such as pawnbrokers and payday lenders. 

And so it is, more of us are relying on high cost credit from payday lenders, personal debt profiles will grow dangerously large, less money will be circulated on the high streets, consumers will be less able to shield themselves from unseen financial shocks and the whole debt cycle starts again.

As the CityWire report notes, the OBR anticipated that a credit boom would sustain an economic recovery. But that boom is being held by fringe financial institutions such as payday lenders who are expensive and suck more money out of the economy than they put in. In turn the tune of increased payday lending, rather than being the silver bullet needed for economic growth, will be its death knell. 

If the economy is allowed to continue to run like this, with Britons being some of the most indebted in the world only able to supplement decreasing real wages and the rising cost of living with high cost credit, then a personal debt bubble will eventually burst. Osbornomics needs to change direction, fast. All the warning signs are there.

Cash Loans. Photograph: Getty Images

Carl Packman is a writer, researcher and blogger. He is the author of the forthcoming book Loan Sharks to be released by Searching Finance. He has previously published in the Guardian, Tribune Magazine, The Philosopher's Magazine and the International Journal for Žižek Studies.
 

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Female genital mutilation is not just a women’s issue, it’s a human issue

A new play explores how two women react when their daughters' friend is subjected to FGM.

Alice Denny was born into a body that didn’t feel like hers. There is no one ‘right’ way to live and no one should have to hide who they really are.  For years, she accepted the guise before eventually making the transition she deserved.

“A life and body to finally match my mind,” she says softly, quoting one of her own poems to me. “I know, it’s silly,” she adds in a fluster, but Alice needn’t be so modest. In fact, she should be very proud.

We’re at The Joker, an offbeat bar in Brighton, and Alice explains how the realisation of her womanhood inspired her to take up a leading role in CUT, a community play highlighting the horrors of female genital mutilation (FGM), which premieres in Brighton next week.

“For anything to stop women from being women, I find so upsetting,” Alice tells me with a communicable heartbreak in her voice.

FGM involves the removal of a woman’s clitoris, inner-and-outer lips of the vagina, and the sewing or stapling together of the two sides of the vulva leaving only a small hole to pass urine and menstruate – depending on the variation. Typically, FGM is carried out with a razor blade on girls between the ages of four and 15, often without any anaesthetic.

This misguided practice, fed by some faux-rationale about raising girls properly, is most common among cultural and religious groups in Africa and the Middle East with the World Health Organisation estimating around 125 million cases across the globe. Many of these communities believe FGM will serve to limit a woman’s libido, discourage sexual promiscuity and strengthen the institute of marriage.

“It’s brutal and makes me almost ashamed to be a human being,” Alice states emphatically.

Of course, to take solace in the fact FGM is not as common in Britain, where it is illegal, is to cataclysmically miss the point. It shouldn’t happen anywhere or to anyone. As it is, an approximate 137,000 women in Britain are affected by FGM, but even that number could be more given the ‘hidden’ nature of the crime.

Daughters of some first-generation immigrants and asylum seekers can be at a particular risk, with these girls taken to their countries of origin against their will during the school holidays for the procedure, allowing them time to ‘heal’ before their return. In reality, the lasting effects both physical and psychological never cease completely.

It is a terrifying thought and one that the incisive CUT, written by Suchitra Chatterjee and Susi Mawell-Stewart, explores. The play chronicles the lives of two women, Brona and Kiva, neighbours forced to face up to the problem of FGM on their doorstep when a shared African friend of their daughters is about to be sent away to be mutilated. Parent of two Alice stars as Brona, while Norma Dixit portrays Kiva. 

So what does CUT hope to achieve?  “It’s about trying to break the conspiracy of silence surrounding this issue,” an impassioned Alice reveals.

The former psychiatric nurse continues: “FGM isn’t something that’s isolated to one place or one group of people. It’s a wider feminist issue, a human issue, which needs to be addressed collectively. The play is about raising awareness, a vehicle to say to women to make the world a better place for each other.

“Women matter, never mind culture, never mind traditions of people being subjugated. We matter and we can make our lives what we want them to be. I’ve made my life what I want it to be and I feel so happy about that.

“People who say ‘it’s nothing to do with us,’ of course it is. It’s brutalizing women. I would love people to say, ‘actually I do know something that’s going on and I will go to the police and they will listen to me.’ I want people to be energized and make it their business.”

Admittedly, CUT, directed by Rikki Tarascas, is not for the faint hearted and will no doubt leave the audience shocked in their seats. Then again, that’s the idea.

CUT will premiere at the BrightHelm Community Centre in Brighton on May 10 and features a pre-show event with speeches from, among others, Khadijah Kamara, an FGM survivor and Heather Knott, a former Soroptomist International UK committee member.