Andrew Vine: Crash course in debt must have been forgotten

I COULD suddenly be transformed into a big spender, if the deluge of credit card offers arriving is to be believed.

Gordon Brown and Alistair Darling led the country during the financial crisis.
Gordon Brown and Alistair Darling led the country during the financial crisis.

If I accepted them all, nearly £30,000 of credit would arrive in about 10 days, to splurge on whatever my heart desires, or make an early start on the Christmas shopping.

And every offer emphasises how good I’ll feel about it. Seeing the faces of loved ones light up when they unwrap just what they’ve always wanted, or indulging myself alongside the pool somewhere sunny, instead of shivering through a British winter.

How I’d feel when I have to pay for what I can’t afford is tactfully avoided in the seductive literature that is dropping through the letterbox with increasing regularity.

I guess that’s because we’re well into September and the annual spending spree that Christmas involves is turning the thoughts of many to how it’s all going to be paid for. Enter the credit card companies, thoughtfully offering a ready-made answer.

I’m both too old and too wary of debt to be taken in. The letters are going straight through the shredder, because I’m sticking to what I can afford. There never has been such a thing as easy money, nor any way to live beyond one’s means without a painful reckoning arriving at some point.

But there are those who will be seduced, like the young couple I know who took out a credit card solely for an extended holiday to the United States and blew its entire £6,000 limit, saying they’d worry about how to pay it back later. Good luck with that.

Irresponsible offers of credit – and a lack of personal responsibility in accepting it – are especially hard to fathom at the moment when reminders are all around of the 10th anniversary of the financial crash that sent economies around the world spiralling into chaos. At its heart, it was all about bad debt.

Saturday marked the anniversary of the single most spectacular financial explosion of the whole crisis – the bankruptcy of Lehman Brothers, the biggest corporate failure in history, prompting a $700bn bailout of the US banking sector.

Here, the Government rescued Lloyds and Royal Bank of Scotland, having already nationalised Northern Rock to prevent it going under.

The convoluted tangle of complex – and possibly even criminal – lending that lay behind it all has supposedly been swept away. But memories of what happened are fading fast.

Last week, former Prime Minister Gordon Brown warned that the world was sleep-walking into another financial crash, and one that a changed, less cohesive international community than in his day would struggle to tackle with the same sense of unity.

Whatever one’s opinion of Mr Brown’s time in office, either as Chancellor or Premier, he deserves thanks for the decisive action and global leadership he displayed when the banking system imploded, which prevented a calamitous situation growing even worse. So when he warns that we need to be worried about it all happening again, we should listen.

Except people aren’t listening. It is almost as though we have learned nothing from it all, despite the price paid in lost jobs and homes, and the years of austerity and shortages in public services that followed as part of the financial shockwave which Britain suffered.

We remain as addicted to debt and risky borrowing as we were before the reckoning of 2008. It isn’t just credit cards, it’s finance for cars, or home improvements.

All the have-it-now temptations that disappeared after the crash exposed them as steps along a road to ruin have crept back and are once again becoming a way of life.

A decade has been just long enough for people to forget how bad it was – companies making rafts of redundancies or cutting wages in order to survive and the sight of people queueing outside branches of Northern Rock to withdraw their money before it collapsed.

And those 10 years have also been long enough for a generation to grow to adulthood with no real grasp of what happened or its consequences. Those are the people most at risk of unwittingly buying in to the same culture of indebtedness.

It is a generation that doesn’t save, and has grown up in an environment of low interest rates that has made trying to put some money aside seem a futile exercise because the returns are so paltry.

Last year, the Office for National Statistics warned that British households were spending an average £900 a year more than they earned. That is not a huge figure in itself, but points towards a growing tendency for people to spend money they cannot really afford.

Companies offering supposedly easy credit must take a share of the blame for this, but so must all those who have forgotten – or failed to grasp – what happened a decade ago when a global catastrophe was made up of millions of victims just like themselves.