Do the numbers of young people borrowing for basic living costs signify a looming crisis?
James Kirkup, director of the Social Market Foundation, says YES.
Debt is not an inherently bad thing, and it can be useful – if you use it to secure assets of increasing value and you have a reliable, growing income to service it. The problem is that too many young people can’t buy such assets and don’t have such incomes.
Even if extensive borrowing among younger people just to meet their routine living costs doesn’t constitute a systemic threat to the financial system, it still corrodes trust in Britain’s economic settlement. Lingering high-interest debt payments will be another drag on the spending power of younger voters, helping destroy their faith that Britain will eventually make them better off as time passes, as it did for their parents and grandparents.
A generation encumbered by debt yet still unable to buy a stake in the system has no reason to support that system, at the ballot box or anywhere else.
Anyone who wants to stop these debts triggering a real political crisis should be coming up with practical policies to give younger people a stake in the wealth enjoyed by older Britons.
Dr Savvas P Savouri, chief economist and partner at Toscafund Asset Management, says NO.
Without being dismissive, it is easy to be deceived by such statistics as “28 per cent of those between 25 and 34 are worried about making repayments on their debt”, or the fact that one in five of those surveyed claim they had met basic food needs with a credit card.
As someone well outside this age group and financially comfortable, if I were asked whether I had used my credit card to buy basic foodstuffs, I too would answer that I did so regularly. This of course leads to the question of how quickly credit card debt is paid down, and how onerous the interest elements can become before some recourse is needed.
As troubling as indebtedness still is, we have come a long way from when it was endemic. Indeed, we are arguably in a better position than ever before in containing the problem and managing its consequences when it hits.
As to those in their mid-twenties and thirties falling into debt, we must bear in mind they have their best earning years ahead of them.