As the Independent reports:
Banks are teaching teenagers to accept debt but not what to do when things get out of control.
And I’m was not the only commentator in the article to say so:
Maggie Kirkpatrick of the Consumer Credit Counselling Service is not optimistic about the ability of this generation to pay back their debts. "Students leaving university now are finding it harder to get higher-paid employment," she says. She detects amongst them "sheer disappointment at not being able to achieve what they expected". And she hopes that they do not get so disillusioned that they just give up on the debt repayments, but she says: "That might be something that grows in future."
And as the report also notes:
But if students do keep on course with repaying their debts, [Richard] Murphy is concerned at the other sacrifices they have to make. "This debt restricts their freedom of choice. They may feel they have got to take the highest-paying jobs," he says.
I am incredibly worried about the impact of debt on society. No one is free when in debt. True, if they have an asset to cover the debt there is relative freedom, but this article related to personal debt — and debt of another sort — the debt incurred to pay for education.
This shackles people and ties them to the workplace in a way nothing else can. No wonder the financial services hierarchy like it so much: a treadmill of debt for life is their dream for the people of the UK. This is the antithesis of freedom.
That’s why I hate debt so much. It is, as the word mortgage says, the grip of death leading to lives lived in quiet desperation at the behest of bankers. It’s a loathsome prospect we must do as much as possible to prevent.
How? Try these options:
1) Ban direct selling of credit
2) Ban store cards
3) Set strict limits on absolute levels of credit that can be granted to an individual in relation to their income at the time debt was taken out and make debt above that level unenforceable
4) Set a legally enforceable cap on interest rates (20% would be high, in my opinion)
5) End student loans and properly fund education instead
6) Ensure that there is a proper social fund so the poorest are not driven into the arms of doorstep lenders.
Now there’s an agenda for the ConDems.
And one every Labour leadership candidate should endorse.
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May I add
Remove the tax deductability of interest payments on debt for all financial corporations. It is after all not really a business expense for this sector but a distribution. The additional revenue to HMRC could easily fund education and pay for the social fund as well as help reduce the fiscal deficit without harming retail banks who do not rely on high levels of leverage for their business.
If you’re interested in interest rate caps, then the group to join is London Citizens. See this, for example
“The Conservative shadow treasury minister Greg Hands promised last night to cap the interest rates charged by store cards, and to consider restricting lending on “other financial products with egregious interest rates”.
http://www.citizensuk.org/2010/02/tasmajdanska-pecina-i-lagumi-u-karadordevoj-ulici/
Richard
How true. I totally agree with you on the danger of debt but I did a double take when I saw that you had written it. How do you reconcile these words of wisdom with your long held advocacy of state profligacy and the imposition of huge debt on future generations of taxpayers?
@woolley
Go and read Keynes
Households and states are not the same thing at all
To mistake the two is the Economics Of Ignorance
The central point you raise is very interesting. The Liberal view is that freedom is lack of state interference in human flourishing, as Mill outlined the individual should seek fulfilment and autonomy. However whereas the neo-liberal state may involve minimal ‘interference’ the finacial world can restrict freedom through its demands for repayment. Employment and life-style are guided towards non-meaningful but well paid existences; but most seek meaningful work that is,sadly, not well rewarded. We are formally free but effectively severely constrained by lack of resources or debt.