There’s a large section of Cameron’s speech today devoted to the topic of debt. Par for the course, you say: it’s the bog-standard Tory incantation.
Except it wasn’t all about the dreaded public debt:
We will not be able to build a sustainable recovery with long term growth unless we fix this fundamental problem of excessive government spending and borrowing that undermines our whole economy.
Second, we had over-indebted households borrowing from over-indebted banks.
Banks lent more than they could afford to — spurred on by an irresponsible banking culture that rewarded short-termism and unmanageable risk-taking.
And households borrowed more than they could afford to — spurred on by an assertion that we had ended boom and bust.
So, when the crash came we didn’t just have over-indebted banks, over indebted households and a big budget deficit, we had the most over-indebted banks and the most over-indebted households as well as the biggest budget deficit of virtually any country, anywhere in the world.
All conveniently in the past and the past tense.
Err, really? Consider Philip Aldrick in the Telegraph:
Figures from the Office for National Statistics (ONS) show that the average indebted household increased their non-mortgage borrowings by £400 between 2008 and 2010, to £3,200. In total, households’ financial liabilities rose 10.3pc from £85.9bn to £94.7bn in just two years…
Howard Archer, UK economist at IHS Global Insight, said: “It seems reasonable to suspect that household debt has risen further. While employment has been resilient, people’s purchasing power has been squeezed by extended weak income growth and elevated inflation.”
He added that the debt burden was likely to hold back the recovery.
“Increased debt levels highlight, along with extended squeezed purchasing power, why consumer spending remains so limited compared to pre-crisis levels,” Mr Archer said. “The extended need for consumers to deleverage is likely to limit the upside for consumer spending for some time to come, and hence constrain overall growth prospects.” …
Mr Archer claimed conditions for households had worsened since the period the survey covered. “Another recent survey from the ONS shows that the economic position of households hit a five-year low in the first quarter of 2012 … [and that] in the third quarter of 2012 real income per head was still 2.4pc below the peak level seen in mid-2009,” he said.
Which means that Cameron is correct that private debt has been a drag on any recovery: the whole 2010 rosy prognostication was based on an assumption that consumer expenditure and, therefore, private debt would carry the economy to the blue horizon. But he is whistling in the dark: not just because (see Archer above) he hasn’t got the statistics on private debt, but more to the point because it has patently increased, rather than been paid-down, since 2010.