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CENTRAL BANK AND GOVERNMENT TO
BLAME FOR CREDIT ‘BUBBLE’
NEW RESEARCH SHOWS BRITAIN
HEADING FOR RECORD BANKRUPTCIES AFTER CHRISTMAS SPLURGE
December 22, 2003
Record levels of consumer credit
after the expected Christmas spending binge could push many more Britons over
the brink into insolvency, says new research released today, Monday 22nd
December, by Jubilee Research at nef (the new economics
foundation).
The briefing, using conservative
assumptions based on rising levels of consumer debt, credit card borrowing and
mortgage lending predicts that, as the dust settles after the holiday season,
Britons will be left with:
As a result, nef predicts
that personal bankruptcies will soar to a new high of almost 11,000 in the
first quarter of 2004 – up 30 per cent since 2000.
While house prices remain
artificially high both in the US and UK, there are ominous signs that these
assets could fall in value. Against a backdrop of falling real wages in the
UK, debts will fast become unpayable for many. A fall in asset values
combined with spiralling debts would impact most severely on middle class
borrowers in the UK where total household debt is now 129 per cent of
disposable income. If mortgage rates rise even to 1997 levels, nef predicts
that British households will face debt payments of 42 per cent of their
disposable income, compared to 31 per cent in 2003.
As the Treasury Select Committee publishes its report admonishing banks for their lending practices, experts at nef argue that neither commercial banks nor consumers should be blamed for ballooning consumer debts. Consumers are not “sleepwalking into a situation of over-commitment” as the Committee report says. Instead they are being lured into debt by creditors operating in a culture of “easy money” – as a result of de-regulation by government and the Bank of England.
Ann Pettifor, Director of Jubilee
Research said: “The explosion in credit card debt, and dubious marketing and
loan-pushing by banks, is a symptom, not a cause of the coming First World
debt crisis
“It should come as no
surprise that banks have exploited the loose regulatory environment to their
own advantage, and pushed loans to gullible consumers. They are doing what any
sensible commercial enterprise would do – grabbing opportunities
provided by the Bank of England and government. It is unfair to blame them,
while ignoring the role of those responsible for guarding the nation’s
finances. “
Jubilee Research’s annual report,
Real World Economic Outlook, released earlier this year, noted that since
the1970s central bankers and politicians have demonstrated a near-total
abrogation any control over the growth of credit. As a result the total
stock of financial assets has mushroomed, leading to an unsustainable
“credit bubble”.
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ENDS -
Notes
to editors:
1.
Jubilee Research is nef's international debt and finance
programme. Jubilee Research builds on the work of the hugely successful
Jubilee 2000 debt cancellation campaign, and in particular its reputation for
providing up-to-date, accurate research, analyses, news and data on
international debt and finance. We maintain Jubilee 2000's tradition of
distilling, analysing and de-mystifying economic concepts and information; and
communicating in ways easily understood by campaigners.
2.
nef is an independent think and do tank
that inspires and demonstrates real economic well-being. We aim to improve
quality of life by promoting innovative solutions that challenge mainstream
thinking on economic, environment and social issues. We work in partnership
and put people and the planet first.
3.
Briefing attached, for more information please contact Jessica Bridges Palmer
07789 515 520
Jessica Bridges Palmer
Media Relations |
