I’m catching up late with this, but this is indeed an excellent post (and, indeed, blog) on the Office for Budgetary Responsibility’s revision of its forecasts on what is going to happen to private debt over the next few years. As public debt is being reduced, private debt is now likely to expand.
Inevitably, government cuts to public services will lead to people paying for them separately, thus squeezing household finances further and driving up household debt; while an economy actively flirting with depression will cause further problems to household debts as people lose their jobs, on top of the impact of the falling value of real incomes, as people seek to maintain living standards as far as possible. That’s not rocket science – except, it would seem, to a government intent on blazing a path back to the 80s.
This may well spell bad news for the 2012 pensions reforms: rising private debt, on top of household savings apparently resuming pre-recession trends, is likely to cause further pressures on peoples’ ability to save (more) for their retirement. At the same time, rising debt is likely to increase pressures for people to have access to their pension pots early. This has already been the subject of a Treasury consultation. Evidently, pensions are not savings per se – rainy days are what savings are for; pensions are for your retirement – but seeking to encourage people to save more while engaging in policies that are driving up their debts is an unhealthy and short-sighted combination.
At the wider, political level, we may well here be sowing the seeds of a future financial crash – but it is clear that the intentional driving up of private debt, despite the lessons of what the economy has been through in the past few years, itself underlines the sharply ideological nature of this government’s intensifying onslaught.
[Edit 1 April: And for living proof that, if you sit an infinite number of bloggers down in front of an infinite number of keyboards, you will get, if not the works of Shakespeare then more or less similar posts, within almost literally seconds of posting this, I discovered that Duncan Weldon over at False Economy had made most of the same points, and better, and with more links, too. Damn!]