When interest rates begin to rise, we're told they will top out at 3%. Don't worry homeowners, say the rate setters, crippling monthly payments are a thing of the past.
Charlie Bean, the former deputy governor of the Bank of
Almost casually, this picture painted by Bean has become generally accepted – that monetary policy will be determined by how long it takes to nurse homeowners back to health. Not just this year and next, when the recovery is sustainable, but for much longer, by which he means until their finances are considerably more robust.
There are critics of this view, including
Yet this, possibly
A report this month by the independent
It's a guesstimate, yet it is only a partial view of the total mismatch between income and expenditure.
In recent months, anti-poverty campaigners have grown agitated about the broader legacy of debt.
Since its inception, Private Finance Initiatives have created around £239bn of liabilities to the taxpayer, with costs being carried forward over the next 20 to 30 years.
The university tuition fee reforms, which allowed the government to transfer almost the entire cost to undergraduates, also kicked the repayments well into the future. Earlier this year, the public accounts committee reported current outstanding student debt of £46bn on the government's books, a figure set to rise to £200bn by 2042 with an estimate attached that shows more than £70bn will never be repaid.
Health costs are growing rapidly and a £30bn shortfall on current spending is predicted by health chiefs as early as 2020.
The pension protection fund (PPF), which looks after the pensions of 6,150 schemes of crashed companies, has a shortfall of around £110bn. Despite the firepower that comes with managing more than £1.1 trillion of assets, the PPF is dependent on strong growth from the corporate sector in the
As we are on the subject of pensions, there is the collective deficit of the
Next in line are public sector pensions. Some are partly funded, some not. All are on the taxpayers' mounting bill, which is officially estimated to be £600bn over the next 60 to 80 years and £1tn by more conservative pension experts.
Of course, governments, businesses and households will continue to enjoy incomes and on current projections, they will be able to afford debt payments. The point is that they won't be able to afford much else.
The funding gap is growing and with deficits on so many fronts, it is hard to see how promises to pensioners and health service users can be met without a dash for growth that is unsustainable, a switch to dramatic cost-cutting in other areas or higher taxes on those who came through the recession relatively unscathed.
To some extent the answer will be to dodge many of the debts steadily piling up. Look at how consumers react. To keep spending on the high street, households are returning to a form of hire purchase popular during the inter-war years. Just like the people who pay for interest-only mortgages, finance plans for car purchases mean that they are effectively leasing the vehicle rather than buying it. In 2013, all the growth in car sales hail from the manufacturer's low-interest offers.
Soon we'll begin to hear that young middle-income families are marrying their new found love of
The foundation's report shows how hard the next few years will be for anyone without well-off parents or a trust fund to enter the higher reaches of academia. Not only must they take out a loan to pay the fees and living costs, their first higher education teaching job will be on a zero-hours contract. When they are more experienced, they may become staff, but on a pension worth a fraction of the current scheme after the shocking £13bn deficit forced managers to cut longstanding benefits.
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