In the News: A Healthy Economy

David Cameron did not urge people to pay down their credit card debt in his Party Conference speech today.

He was going to. The draft being widely reported this morning read:

“The only way out of a debt crisis is to deal with your debts. That means households – all of us – paying off the credit card and store card bills.”

I heard it on the morning news and thought “Ooh, that’s bold. He’ll get criticised for that”, but also “Good for him!”

Sadly, though, ‘economists’ intervened and warned Mr Cameron that if people were channelling all their money into paying off their bills, that would mean they weren’t out shopping, which would be bad for the economy.

Of course, no Prime Minister wants to do anything that would be bad for the economy, especially at a time when the economy is struggling anyway, so Cameron backed-off.  His speech eventually said :

“That is why households are paying down the credit card and store card bills.”

This just upsets me for so many reasons I can barely straighten them out in my head.

Firstly, if David Cameron changed his speech because he was afraid he would get criticism for it (Shadow chancellor Ed Balls for one said people don’t want an out-of-touch Prime Minister lecturing them about their finances), then I’ve lost any respect I ever had for his leadership and think he should hand the baton on to someone with the courage of his or her convictions fast.

Worse than that, though, is if he decided to change the speech because the economists had convinced him that it is better for Britain if people stay in debt  as long as possible (provided they keep spending as though they were not in debt, of course).

It is not good to be in debt.

People who are in a significant amount of debt often feel depressed, hopeless and fearful. This can affect the physical, mental and emotional health first of the person in debt, then of his or her family. Debt is a burden, a big dark, ugly, heavy weight around the neck. It is often accompanied by feelings of shame, even when the debt was occurred through no fault of their own.

Is this our vision of a healthy society – one peopled by shame-filled, hopeless, depressed citizens?

It is not easy to get out of debt, and if Cameron’s speech were to be modified at all, perhaps it could have included some ideas for where people could get debt advice if they need it (here’s one to start with: Christians Against Poverty, though there are many secular services, too).

The other thing which angers me about this change is the perspective of the economists. Of course they don’t want Britain to end up in the kind of financial difficulties being experienced by Greece, but they seem unable to draw what seems to me a fairly obvious link between an economy which relies on many of its citizens being in personal debt and a country that is in debt. The one may not necessarily cause the other, but the underlying ethos of each is effectively ‘Shop till you drop’.

If people pay off their debt, the money won’t stop circulating. There may be a slight slow-down in the shops (interestingly, supermarket chain Tesco’s sales figures, released today, show overall growth, but a fall in non-food sales, particularly in electronics and entertainment), but this will only be temporary. The biggest problem with credit card and store card debt is the interest payments – it takes a big, concerted effort to clear those, but once that is done, all the money people were once spending on interest, they are now free to spend on goods again (or to save, perhaps towards buying a home, thus boosting the housing market).

Yes, in the interim there will be a couple of years which are very tough for retailers and manufacturers, and yes, small businesses will suffer the most, as they are reliant on every penny of income, unlike the bigger chains who see yearly profits (not just turnover) in the billions of pounds. It will be a problem for those small businesses, and the Government will need to have a plan for helping them weather the storm, but like the storms we’ve faced before, it will pass.

If he is seeking to avoid a small storm now, David Cameron will succeed only in storing up a bigger one for later. We can’t go on piling up debt upon debt and thinking it will never be a problem, that the tower will never tumble. Neither history nor common sense bear that out.

A healthy economy, populated by healthy people, can’t be achieved when those people are urged to live beyond their means in the pursuit of more and more ‘stuff’. We mustn’t let the trials of the short term deter us from the long term benefits. We all know life doesn’t work like that.