The Belfast Telegraph has not been having a great run recently in its choice of news priorities, but it did hit the mark on Friday with a piece on household debt in Northern Ireland. We need to have a much more practical discussion about this, as it may be the single biggest socio-economic problem we have.
I wish to return to the subject on this blog next week, but today I wish to establish two things – debt is a driver of poverty and we all have a role in overcoming it. I will look at these separately.
To be clear, this means debt is a driver of poverty as much if not more than the other way around. Thus it affects people of all income levels, and can do them serious harm in a number of ways (there is significant evidence, noted in the article, that in fact a higher percentage of people in work are affected by debt than those not it work).
This is an issue poorly served by quoting statistics, but we do need to look at some which have already appeared on this blog: Northern Ireland economic product per head is only 75% of the UK average; wages are only 89%; yet household spending is 96%. We need to be very clear about this means: we are not earning enough to spend the amount we wish to spend.
This is where we all have a role in overcoming it comes in. We are allowing public policy to be developed and public debate to take place towards a society in which retail and leisure constitute our “economy”, and the focus is solely on “spending”. In functioning economies, the “economy” clearly means the creation of valuable products and services, not least for export, and the focus is thus on productivity and value.
Let us put more bluntly what this means: Northern Ireland residents do not produce or contribute enough economically to enjoy the standard of living to which they believe they are entitled. The issue is not that they do not get enough to spend what they do, but that they do not earn enough to spend as they do. If they wish to maintain a standard of living at around the Western European average, they will have to produce and contribute as much to the global economy as other Western Europeans do.
This is not remotely a condemnation of people who have run up vast household debt. It is a condemnation of public policy and public debate which is predicated on presenting as an optimum a certain level of expenditure rather than a certain level of productivity or value. We are all guilty, at least up to a point – even those who are not actually in debt – for allowing policy and debate (and frankly social norms) to be skewed in this way.
For the week between now and the next post on the subject, I will leave just one question hanging (I would be grateful for any informed answers), but I would be grateful if readers let me know if they disagree with the premise (not for the first time, I may be wrong).
The standard “middle-class” lifestyle is seen to be a detached house (ideally in the suburbs); two cars on the driveway (one probably a premium brand); children in grammar school (and ideally the odd sports team); two holidays a year (probably both international); and frequent leisure (eating out etc) – this is the one presented in the car, insurance and holiday adverts, after all.
Yet I reckon to live such a life, particularly if there are no grandparents or other family to assist with the children, you need a household income of at least £100,000 or very close to it.
What percentage of Northern Ireland households have such an income?