Thursday, 22 September 2011

Personal debt.. let's blame it all on the Tories

The Green Benches: Personal Debt set to grow £566bn under the Tories (OBR)

Now, I am no fan of personal debt. Tough economic times almost certainly will lead to it rising.. incomes necessarily fall, and as we try to maintain our standards of living the money has to come from somewhere. We just hope to be able to catch up again in the future, or die before we have to. It's our own domestic Keynesianism.

But, what Eoin does here is take personal debt under the final year of Labour, and show how it's projected to rise under the Tories. All correct, all deeply unfortunate.

He doesn't show us how it rose under Labour.

His source document helps a little. Look at chart 1. The bottom line is debt as a percentage of income (a more helpful measure than the absolute amount of debt, I'm sure you'll agree). That also shows that the proportion will grow over the next five years. It shows, in fact, that it will grow back to what it was in 2007, at the end of a dramatic rise which started on or around 2002. Remind me again who was running the country then?

And, let us go on, between 2002 and 2007 there was no recession. There was no global financial crisis. It was boom. In our little domestic Keynesian world this was the time we should have been saving for a rainy day. So, if we're calling Giddy Osborne a 'glorified loan shark', what does that make Gordon Brown and Alistair Darling? At least Giddy is overseeing unsustainable domestic borrowing in a time when there's an argument that we need it.

Eoin then gives us a chart showing a fall in net household worth as a percentage of income. Again, that's possibly undesirable... but it takes into account much more than household debt. That would also include a decline in asset values such as houses. Personally, I think a fall in house values is a bloody good thing which everyone on the left should be delighted about. For clarity, however, I would not for a minute suggest that this means the data Eoin shows is all good, it's not.. it just doesn't serve his purpose very well.

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