The living wage and household debt

Two recent news items require attention.  The first is that a lot of businesses in the United Kingdom expect to increase their prices in the new year.  This is in response to the so-called national living wage which will come into force in April next year at a rate of £7.20.

The other news item is that household debt in the United Kingdom is rising at an alarming rate.  The Daily Mail reports that:

... families are set to spend £40 billion more than they earn this year.

In the depths of the crisis in 2009/10, families spent £67 billion less than they earned as they moved to cut their debts.

I recall that the recession of the early 1990s was preceded by a credit boom in the late 1980s when far too many families spent beyond their means.

But to return to the first news item.  It is of course true that an increase in the minimum wage might lead to higher prices in the shops.  The current minimum wage stands at £6.70, and so £7.20 represents an increase of less than eight percent - roughly equivalent to an increase of around five pence on the price of a bar of chocolate.

If a company's payroll amounts to forty percent of its total expenditure, then its overall expenditure will not need to rise by more than three percent to accomodate the rise in the minimum wage.

Where prices increase - and not all employers are threatening to increase their prices - then the British public can choose either to pay those higher prices or to reduce their spending.  Given that the increase in the minimum wage will leave many working people better off, then maybe they will tend to pay the higher prices.  By contrast, if people tend to reduce their spending rather than pay the higher prices, then the companies which raise their prices might have to lower them again in order to attract custom.

Another threat related to the living wage is that some companies expect to employ fewer people.  Nevertheless some companies are already paying the living wage, and I'm not aware that any of them are laying off staff as a result.

I am far more concerned about the rise in household debt than I am about the living wage.  I urge all readers of this blog to avoid any increase in their level of borrowing.  Any increase in personal borrowing across the economy as a whole is likely to result at some point in an increase in interest rates, thereby making borrowing more expensive.

As a final point, I will repeat the comment left on the website of one national newspaper that the living wage is only decribed as a living wage by people who do not have to live on it.

Related previous posts include:

The minimum wage and prices
To build on debt is to build on sand

Controlling inflation

Glamour model with student debt

Catherine Byrne is a young woman who recently secured £14,000 in student loans, which she then spent on breast enlargement surgery so as to allow her to pursue a career in glamour modelling.

The loans do not need to be repaid until she starts earning £17,335 per year, and will be written off after twenty-five years if she never earns that much.  Miss Byrne intends never to earn that much, and never to repay any of her student debt.

So far as I am aware she has not broken any law.

Miss Byrne is far from alone.  While I am not aware of any other person who has spent their student loans on cosmetic surgery, I am aware that many graduates try to exploit the earnings threshold so as to avoid paying off their graduate debt.  I can't say I blame them.

Miss Byrne has said that her breast enlargement surgery has benefited her career more than any degree ever could, which may well be true.  There are at present many thousands of graduates in this country who are either unemployed or else trapped in poorly paid jobs which they do not enjoy.  By contrast, Miss Byrne can realistically hope to earn £17,000 per year working only fairly modest hours.

She is quoted as saying that she is probably happier than most of the people who enrolled on the course at the same time as her, and I won't argue with that.

As Omar Khayyam noted more than nine hundred years ago: Make game of that which makes as much of thee.

Related previous posts include:
The sordid truth about far too many young people

On benefits and in debt

A national newspaper is reporting the case of a young single mother who is living on benefits with her two children, and who owes a lot of money to various loan companies.  The comments are generally far from sympathetic, but I wonder how many of these comments are from people who are sensible about borrowing money.

Let me repeat what I said in a previous post: I believe that we are all morally obliged to live our lives free from debt if we can.

It is easy for someone who is earning a comfortable salary to borrow money and be confident of repaying the loan in full, but almost anyone can suffer a reversal of fortune.  Nevertheless while I believe that people should think before borrowing, I also think that lenders should perhaps think more before lending.

While I wonder why anyone should want to borrow money to buy Christmas presents, I also wonder why anyone would want to lend money to someone to buy Christmas presents.  Children like presents at Christmas, but they benefit from having parents who are sensible with money.

Previous related posts include:
To build on debt is to build on sand
A rent arrears crisis in London

To build on debt is to build on sand

While many families are struggling to survive in these times of austerity, the Tudor Whelans are unusual in that they used to enjoy a life of luxury.

Home was an £800,000 six-bedroom house with views across the Lancashire countryside. They drove a top-of-the-range Audi and Range Rover and their daughters went to private schools where fees cost up to £12,000 a year.

The family owned five horses ...

The reason why they are now impoverished appears to be that their vast business empire, when it existed, was built on debt.

Many people buy houses by taking out a mortgage, and many people get into financial difficulties as a result.  In many cases I am inclined to be sympathetic, but of course most people in Britain would not be able to buy a house without taking on debt.  Likewise, many people who start up businesses do so with borrowed money, but that is very different from trying to enlarge an already successful business by taking on yet more debt.

The Tudor Whelans did not need to build up anywhere like as much debt as they did.  Why on earth would any sane couple with debts buy a six-bedroom home for themselves and their two daughters? Why would anyone in their right mind buy expensive cars on credit?  Of course I do not know that the cars were bought on credit, but they were certainly bought at a time when the Tudor Whelans owed a lot of money.

The poet and politician Hilaire Belloc argued that rich people are morally obliged to give employment to the working classes.  I firmly believe that rich people are morally obliged to live their lives free from debt.  In fact I believe that we are all morally obliged to live our lives free from debt if we can.

The Tudor Whelans should have bought a three-bedroom house, and driven modest cars.  Their daughters should have gone to state schools from the outset, and a gerbil or a hamster would have been far less expensive than five horses.  At some point they should have stopped borrowing money to fund their business ventures, and set about the serious business of reducing their debt burden.

If they had gone down that route, then they might still have the three-bedroom house, and the modest cars, and the gerbil.  People who borrow money beyond what is reasonably necessary are a disgrace to their country.

Gambling ruins lives

Liverpool City Council has demanded a ban on fixed odds betting terminals (FOBTs). Players can gamble up to £300 per minute on these machines.  FOBTs have been likened to crack cocaine.

A local councillor has commented that:

I’ve heard stories of ordinary people, doing ordinary jobs, who are going into the bookies on pay day and losing a whole month’s salary or wages in one session.

These machines are causing real problems in Liverpool. People are losing their jobs, their relationships are breaking down, they are losing their homes, turning to loan sharks or payday loan firms and even committing crimes because of gambling.

What I find ironic is that this is a Labour councillor speaking.  The last Labour government relaxed the gambling laws, despite being warned that doing so could cause misery.  This should surprise no one.  If you are Prime Minister, then you have an obvious incentive to pander to the whims of big business.

Some readers might be thinking that the party of government has an obvious incentive to look to the wellbeing of ordinary people.  The trouble with that point of view is that far too many ordinary people in this country cast their votes in elections for political parties which do not care about them.

This is not merely a failure of Labour government.  The present government has shown no inclination to take this matter seriously.

If your life has not yet been blighted by obsessive gambling, then maybe your turn will come in due course.  Then again, you might like to join a political party which actually cares about the people of Britain.

Previous posts about gambling include:
I hate gambling
Gamblers take a risk

Gamblers take a risk

A man from Bristol is upset that the gambling firm Coral has not paid him the promised amount of money on a winning bet on the grounds that they gave him the wrong odds.  Apparently he can make a complaint to the Independent Betting Adjudication Service, who will then be able to require the full payment.

I have heard other cases of where betting shops or casinos have refused to pay out winnings to their customers. A favourite ploy of casinos is to allege cheating, while at least one betting shop refused to pay out on a winning bet on the grounds that they did not take bets on that particular sporting event - even though they just had.

Nevertheless, my sympathy is limited.  Gamblers know that they take a risk, and also that the odds are always stacked in favour of them losing.  Now that you know that bookmakers and casinos sometimes refuse to pay out even when clients win, are you going to set foot in either a betting shop or a casino?  Ever?

I have never heard of any instance of either the national lottery or a bingo hall refusing to pay out a prize to a customer for a dubious reason.  If you cannot resist the temptation to gamble, then do yourself a favour by staying away from betting shops and casinos.  It would be a great day for Britain if every single betting shop and casino closed down from lack of patronage.

A tale of two scumbags

Justyn Larcombe is £100,000 in debt.  It appears that this man who once had a successful career and a family wants us to feel sorry for him because he ruined his life with a gambling obsession.  He did not just squander one huge sum of money after another.  He sold family possessions, lied to his wife, and neglected a sick child.

Mr Larcombe, you are a scumbag, and I have no sympathy for you.  Of course many people in this country ruin their lives with excessive gambling, and many of them turn to crime to obtain more money to gamble with.

When will you develop an obsession with gambling?  Maybe you won't.  Maybe someone in your family will.  Maybe a colleague will, and maybe you will be made redundant when the said colleague steals loads of money from your employer and cannot pay it back.

The LibLabCons love gambling.  The evil Tory Prime Minister John Major gave us the national lottery, but did not put any safeguards in place to prevent it ruining the lives of stupid people and their family and colleagues.  The evil New Labour duo of Blair and Brown gave us casinos open 24/7, but also failed to provide any safeguards.  If you vote Labour or Tory or LibDem, then you are part of the gambling crisis in this once-great country.

Scumbag number two is Gyles Brandreth.  This horrid man was a Tory MP and whip back in the 1990s, and he has just spilt the beans on his activities in the corridors of power.  For those who don't know, MPs are required to vote as and when and how their party dictates, and whips are MPs whose job it is to tell their fellow MPs how and when to vote.  He explains:

Each whip has 25 to 30 individual MPs in his or her flock ...

One MP I saved from bankruptcy and at least three from scandalous exposure. They owed me their support. I helped supply others with a better office, a place on the committee of their choice, an invitation to a royal garden party, tea with the prime minister, a parliamentary trip to a sun-kissed island in the West Indies, and the promise of preferment. They were in my debt.

While saving a fellow MP from bankrupcy may be all very well, the other things listed are pretty disgusting. Why should any MP be given a trip to the West Indies as an inducement to toe the government line? He continues:

In my experience, most MPs are committed to their work. They’re not cheating on their expenses or chasing their secretaries round the House of Commons library. They work long hours in the interests of those they are elected to serve.

They may not have chased their secretaries, but Brandreth makes clear that at least one of the MPs in his flock was an adulterer.  As for not cheating their expenses, what planet is this man on?

Fortunately, Brandreth was not allowed more than one term in parliament.  He notes that:

Some of my colleagues who also lost their seats had breakdowns. Others, because of their age and because they had little experience outside politics, found it impossible to get another job.

I have no sympathy for any Conservative MP, nor for any Labour or LibDem MP.  They are parasites who feed off a largely gullible public.  Britain would be a much better place if the LibLabCon parties had no MPs at all.

Update: another former Conservative MP has lifted the lid on events in the House of Commons.  If you don't have time to read it right through, then it includes the quote: when it came to dirty tricks, I was just an amateur compared to the whips.  We pay their salaries.

Another update: Justyn Larcombe's wife has now spoken out about his selfish behaviour.

Lending money at interest: I call it usury.

Stephen Fossey has been spared prison for operating as a loan shark.  While he was breaking the law by not having a permit, he was nevertheless lending at fairly modest rates of interest, imposing no penalty charges, and never threatening anyone he loaned to.

Payday loan firms habitually charge truly shocking rates of interest, and are acting legally.  I merely observe the fact.

Lending money at interest is quite simply usury. It is an old-fashioned word, but entirely fitting.

Another danger we vote for

I have just read about a woman who was conned out of a fortune by a man who turned out to be a gambler.   There is no excuse for what this horrid man did, but I cannot help but wonder if he would have been a confidence trickster had he not also been a gambler.

John Major introduced the national lottery, and the subsequent Labour government further relazed the gambling laws.  Maybe it is time we started voting for politicians who want to tighten the gambling laws.  I can dream.

I hate gambling

Oxfordshire Trading Standards are campaigning to make people in that county aware of scams such as bogus lotteries.  Apparently a pensioner in that county lost his thirty thousand pound savings to a scam.

Sadly, a lot of people in this country lose money to the national lottery - founded by John Major - and yet that lottery is entirely legal.  The national lottery is not the same as a lottery scam, because with the national lottery you do actually stand a chance of winning some money.  Nevertheless most people lose money, and there is no legal cap on how much you can spend on lottery tickets, and so there is also no legal cap on how much you can lose.

The Labour government which followed on from John Major's Conservative government further relaxed the gambling laws, and the present ConDem government has not yet seen fit to protect the people of this country with new legislation.