Week 41 2013

Tendring Topics…….on line

A Helping Hand

       

   It is a sad comment on today’s world (or perhaps on my state of mind!) that my heart sank when, responding to a ring on my front door bell, I found two personable young women smiling at me.  Were they hoping to sell me something, seek my financial support for some worthy cause; or try to persuade me to become a Mormon or a Jehovah’s Witness?   It was none of those things.  They were calling on me and my neighbours  to publicise the help that is available from our local Citizens’ Advice Bureau.  They gave me a flyer, reproduced here, giving contact details and the range of their service and – no doubt noticing I was leaning heavily on a stick! – assured me that if, when I needed help or advice, I couldn’t get to their office they would gladly send an adviser to my home.

            They also handed me a very useful little leaflet entitled Quick Guide to Welfare Reform which sets out the effects of the Government’s recent changes to Social and Welfare Services, how they may affect us and what we can do to help ourselves if we are affected. The leaflet tackles the replacement of Disability Living Allowance with Personal Independence Payments, as well as Social Fund Reform, Universal Credit (replacing a number of currently means-tested benefits) the Benefit Cap, the Bedroom Tax and Council Tax Benefit. In each case brief advice is given on ‘what can I do?’ to those affected.

            Supposing, for instance, you are currently receiving Disability Living Allowance and you get a letter (as, if you haven’t already had one, you undoubtedly will!) from the Department of Work and Pensions informing you that that allowance is coming to an end and asking if you want to claim Personal Independence Payments.  If you fail to claim PIP your payments will simply stop.  Your local Citizens Advice Bureau will help with your application for PIP, with appealing the decision if you are not awarded PIP, with finding out what other benefits may be affected and advising you on coping financially if you have a drop in income.

           

A Nation of Debters!

Nowadays practically everyone is burdened with debt to an extent that was unheard of in my pre-World War II childhood and youth.  In those days if you wanted something badly you ‘saved up for it’ perhaps for months or even years.  My parents had a horror of debt that, to some extent, they have passed on to me.  I remember them discussing far into the night whether or not to buy a radio (in those days it was a wireless set of course!) by hire purchase or, as my dad disparagingly described it, ‘on the never, never’.  They did decide to do so in the end!

            How very different things are today!  ‘Saving up’, was struck a mortal blow with the advent of the credit card.  Do you remember the posters advertising the very first ones?   ‘Barclaycard takes the waiting out of wanting!’  Daytime commercial television owes much of its finance to adverts for those easily obtainable (but less easily cleared!) payday loans – ‘Two or three hundred pounds till next payday – just to get you through a one-off crisis’.   But, of course, it’s unlikely that you’ll be able to pay back the whole of that loan plus interest, on your next payday – and the interest will begin to accumulate!

            Then there are debts resulting from government policies.  Student loans, to pay tuition fees and living costs, can amount to £20,000 or more – a debt that can hang over former students’ heads for the whole of their working lives.   House purchase by means of a mortgage loan is strongly encouraged by the government that has the ideological aim of creating \a nation of home owners.  That may be the result in twenty or thirty years’ time.  In the meantime though it creates only a nation of home buyers – a nation of debtors, any one of whom could lose his or her job at any time, default on the mortgage payments and become homeless.

            It is no surprise therefore, to discover that debts are among the most common problems about which Citizens Advice Bureaux are consulted.  They can’t make debts disappear but they can help you to sort out your household budget and perhaps negotiate with your creditors to work out an acceptable way for you to deal with that debt burden.

            Debt is like a cancer.  The sooner it is caught, the more likely it is that there will be a happy ending.  The borrower should consult the local CAB before being ensnared by a loan shark or a payday loan provider.  If you live in the Tendring District phone the number on the flyer at the beginning of this blog.  I think I am right in saying that wherever you live in the United Kingdom there will be a CAB within a few miles.  I know that Tendring Topics….on line has readers in the USA, in Russia, in mainland China and elsewhere in Europe and the world. Debt is a universal scourge that ignores national borders.  I can only hope that there are similar services in their countries for those who need them..

A Housing Bubble?

            I have never pretended to understand economics.  I hope though that I have my fair share of common sense.  It is obvious to me that when the demand for an object or a service increases more rapidly than that service can expand or the objects can be supplied, the price of that service or those objects will rise.

            This is what happened with the housing market in the 1990s.   The demand for houses (spurred on by the political ambition of home ownership for all) outran the supply.   Thanks to Mrs Thatcher’s ‘right to buy’ legislation (that the New Labour Government had lacked the courage to repeal) there was no large stock of publicly owned homes to help keep rents down, so private landlords raised their rents as high as ‘the market’ permitted. The ethical principle of the 'free market'  is, of course, to get as much as you can grab for as little as you can get away with. 

            The demand for home ownership increased.  To encourage purchasers, banks and building societies were prepared to lend 95 percent of cost of house purchase – in some cases even 100 percent, with perhaps an additional loan for the purchase of furniture.  On day-time commercial tv, money-lenders touted for custom; ‘Never mind if you’re unemployed, disabled and have a low credit rating.  We may still be able to help you with a loan’.  ‘Then thrived the usurers’, as Shakespeare might well have put it had he lived at the end of the 20^th century instead of the 16^th!

            Inevitably the bubble burst.  Thousands were left with huge debts and homes that had lost their value overnight. Thousands were made homeless, having lost their homes (that they had thought they owned!) and their savings.  Banks and building societies had to seek government help and the government used our money to rescue them.  That – as the former governor of the Bank of England repeatedly told us – is the cause of the country’s financial problems.  It wasn’t the poor, the unemployed and the disabled who produced the financial crisis from which the government is now trying to extricate us, but the banks and the money lenders aided and abetted by a business friendly government.

Once bitten, twice shy.  The money-lenders, having been rescued with our money, were determined not to be caught out again.  There was still a demand for homes – still no great reserve of social housing to keep rents at a reasonable level.   Interest rates have been kept artificially low but lenders could sieve out risky borrowers by demanding a much larger deposit than in the past before agreeing to a mortgage.  Often twenty-five percent or even more of the purchase price was demanded.

Is history about to repeat itself?  When the government first announced their help-with-the-deposit scheme that guaranteed all but five percent of the deposit on a mortgage, I commented in this blog that the demand for homes ‘at affordable prices’ would now outstrip the supply. Those ‘free market forces’ that are so popular in government circles would ensure that  house prices would rise – perhaps as another bubble expanding to bursting point?   Since then the Institute of Directors, the Institute of Chartered Surveyors and the national Chambers of Commerce are among those who have warned of the same danger. 

Has the government heeded?  Not a bit of it.  They have expanded the scheme to include the purchase of existing houses as well as new-builds and at the recent Conservative Party Conference it was announced that the scheme would begin immediately instead of in a year’s time as had been earlier announced.  It does of course need the co-operation of the Banks and Building Societies. Only Lloyds and RBS (over both of which the government can exercise direct control) have so far agreed to take part. In the meantime, house prices are rising.  I suppose that, as a home owner with my mortgage long since paid off, I should be pleased. I’m not!