Let me give a cheer for the Bank of England

Regular readers will know I have been critical of the Bank for its tough squeeze on car loans and mortgages since March 2017. Some of you have written in to support  the Bank, claiming with them that the build up of consumer debt and mortgages  is worrying and they are right to rein it in.

So I was pleased to read the recent speech of the Deputy Governor Broadbent who has offered a more considered position by the Bank of England. They now acknowledge that there has been no worrying increase in consumer debt as reflected in credit card, overdraft and other borrowing. The main increase in consumer borrowing has occurred through an increase in student loans as more people graduate from universities under the loan system. As the Bank recognises, much of this debt will never be repaid, and it is more a state debt than a personal one as repayments are only made above certain income levels. It is more of a graduate tax on success. There has been a more modest rise in car loans, but as the Bank now accepts most of this is a kind of hire contract. There is no risk for the individual who would simply surrender the car. The individual does not own it. The Bank also accepts that the ratios and spread of these car loan hire contracts is sufficiently broad for there to be no great risk to the financing houses responsible.

I hope this more thorough analysis by the Bank will lead to a relaxation of policy on car hire contracts. I hasten to add I have  no personal interest as I do not want one myself. There are however many people who would like to renew their car and buy a more fuel efficient and clean vehicle, currently restrained by the squeeze.

The Bank also points out that mortgage affordability is considerably above the levels that prevailed in the years before the banking crash. Whilst house prices are on average well up and a higher multiple of earnings than in the 1990s, the much lower interest rates means that mortgage outgoings are not up as a proportion of income on normal levels at the end of the last century. Again the Bank rightly confirms my view that there is no excessive mortgage debt problem out there.

Both our housing and our car market have been damaged by high and increased transaction taxes, by changes to other tax arrangements and by a credit squeeze. It is time to relax it a bit. I am glad I can now agree with the Bank’s analysis, which seems thorough and convincing over this issue of debt.

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130 Comments

  1. Mark B
    Posted January 26, 2019 at 5:58 am | Permalink

    Good morning.

    I am one of those who believe, and still believe, that the BoE is right to reign in some spending. Interest rate are still far to low for savers who rarely get a mention. People need to hold some cash for a rainy day and need to know that its spending power compared to inflation will at least hold. That is not the case today.

    More and more people are having to raise larger deposits for their first home. At the moment, as our kind host says, rates are low and repayments easy but, but what if the market changes as history has repeatedly shown ? What then ?

    I advocate growth, but growth that is sustainable.

    The car has been attacked by Supranational, national and local government. Whether it be through regulation (electric car nonsense) or through taxation and fines.

    And in anycase, one swallow does not a summer make 😉

    • Lifelogic
      Posted January 26, 2019 at 6:42 am | Permalink

      The high street banks used to pay me about base rate on deposits a charge about base plus 2.5% on my borrowings. Now they pay about 0.5% at best on deposits and try to charge me 24 times or even up to 120 times this sum on overdrafts and credit cards. They clearly must get away with this racket for many customers. Where is some real competition.

      • Stephen Priest
        Posted January 26, 2019 at 9:57 pm | Permalink

        The Conservative Party needs to break away from it’s non Conservative, non Free Market, non Individual Liberty, Brino, lets out Corbyn Corbyn wing led by
        Theresa May.

        • Stephen Priest
          Posted January 26, 2019 at 9:58 pm | Permalink

          Sorry for the apostrophe in “its”

          The Conservative Party needs to break away from its non Conservative, non Free Market, non Individual Liberty, Brino, lets out Corbyn Corbyn wing led by
          Theresa May.

    • Hope
      Posted January 26, 2019 at 10:19 am | Permalink

      JR, you still fail to omit the blinding obvious: May countenanced this with the assistance of Hammond to scare the public to remain or at least be in servitude forever under capitulation plan. This was a conscious decision by May and Hammond. Carney given an extension after all his failed tests and predictions and his overt political comments.

      Your party is done. Dishonest throughout its core..

    • bigneil
      Posted January 26, 2019 at 10:30 am | Permalink

      ” repayments easy ” ? That depends on what financial status you have. Those losing their jobs at JLR and M&S won’t think so. And what about the constant new arrivals that have to be paid for? Who will be paying for THEIR housing ( and the rest of the freebies )? WE will – – and meanwhile – we throw £55m a day to the EU – God knows what on HS2 and a pile of money into foreign rulers pockets, under the name of “Foreign aid.”

      • Karl
        Posted January 26, 2019 at 7:15 pm | Permalink

        Steady on bigneil- as JR knows the only way to change government policy is to get into politics. Soon we’ll be outside of the EU and all our problems will just fade away- we won’t know who to blame

        • matthu
          Posted January 26, 2019 at 10:29 pm | Permalink

          Not sure about that … the gillet jaunes seem to have effected change in some of Macron’s policy without getting into politics. Or is it your view that what they are doing is the new politics?

    • Hope
      Posted January 26, 2019 at 10:43 am | Permalink

      Greg Hands MPis correct in his tweet repeated in conhome, some Tory ministers threatening to resign from government unless allowed to vote with a Labour amendment!

      I ask: Why are they not sacked? Tory govt repeatedly tries to threaten everyone against a Corbyn govt!

      Boles with working Cooper! Letwin and Clarke wanting to work with Labour! It shows that some of us are right different cheeks of the same arse as the EU is the govt and parliament a show for personal greed, kudos and life style.

      What are these associations doing? Clarke and Letwin will leave at the next election so EU kamaksy behaviour does not matter to them, it should for their party.

      • Hope
        Posted January 26, 2019 at 4:32 pm | Permalink

        JR, please explain why Rudd wants to give up governing under Tories to vote and act under a minority of Labour MPs?

        Hammond still banging out his dross to scare everyone. Has the minister been found who touted Airbus to scare us? I suspect all with the connivance of May.

      • eeyore
        Posted January 26, 2019 at 5:46 pm | Permalink

        Truly we live in interesting times when the normal rules do not apply. But we are in the middle of a revolution – a strange British sort without mobs or riots, shots or deaths, but a revolution nonetheless.

        The good thing is that our differences are fought out not in the streets but in the Chamber of the Commons, and not by angry young crazies with big beards but dull, verbose middle-aged men and women only too conscious they are feeling their way in the dark. Instead of guns we brandish precedents.

        However the cards fall in the end, this is encouraging. There is hope for us yet.

      • Oxiana321
        Posted January 26, 2019 at 5:48 pm | Permalink

        Those MPs who seek us to remain have always been fully aware of the direction of travel and the implications for our democracy by becoming part of the Federal State of Europe. If you have thrown your lot in for this cause, by implication you must ultimately care little for the ‘Mother of Parliaments’ and its fate. Hence, teaming-up with Labour to ensure your life-long ambition is realised must surely seem worth it in the overall scheme of things.

  2. Lifelogic
    Posted January 26, 2019 at 6:22 am | Permalink

    Indeed the banks are absurdly restrictive and very expensive on fees, margins, terms and loan to values. This especially for buy to lets (where are foolish chancellor is taxing “profits” that are not real and charging an extra 3% up to 15% total on transactions – thus slowly killing a vital whole industry). Loan for commercial property and development are very restrictive and expensive. This damages the provision of much needed housing very significantly indeed.

    It is very odd that I can find an unsecured loan a £25K (for perhaps a holiday, a boat or just to waste at about 2.99% APR and yet the same bank want far more for a sensible property development loan fully secured on a property worth double the lending. This is surely totally irrational? If I have say £100K to put on deposit the main banks offer only about 0.5% at best but if you want on overdraft they often charge from 12% to even 68% for one of the main high street banks. Competition is severely lacking in banking they are getting away with murder. Charging 24 to 136 times what they pay on deposits!

    On student loans over half of the debt and interest will never be repaid worse still about least half of the degrees have little of no value anyway. Plus the student has lost three or more years of a wage and work experience. Even people qualifying as doctors will struggle to pay of the full debt they have built up (over five or six years) and this debt will also severely restrict what they can borrow to buy a house or flat. Far more people should study while working and learn on the job.

    • Al
      Posted January 26, 2019 at 6:56 am | Permalink

      Have you explored business finance? Unsecured loans to blow on holidays or general life expenses are easily to get. As several of my clients have reported, trying to get the same amount for a business, particularly a small business, means the restrictions go through the roof and security is required – and it can be the same person involved!

    • James
      Posted January 26, 2019 at 8:11 am | Permalink

      I think more worrying is the ‘government’ debt and continuing budget deficits which require the raiding of capital markets, thereby reducing the overall finance that is available to productive industry. The solution is a radical downsizing of the government and public sector, including wholesale elimination of quangos and a bonfire of ludicrous regulations which serve only to disrupt production.

      • Posted January 26, 2019 at 9:31 am | Permalink

        Hear, Hear!

      • Dominic
        Posted January 26, 2019 at 10:09 am | Permalink

        Destroying Labour’s all-consuming client state is a multi-generational political project. To achieve this aim requires a determined Conservative Party.

        Unfortunately the UK is encumbered with two main parties concerned only with feeding off the taxpayer to massage favourable political circumstances. May throwing cash (rather than reform which involves conflict) at the bottomless pit that is the NHS, capitulating to NHS expansionists, to eliminate negative press headlines is a classic example of the shameless abuse of the taxpayer by a political party that’s given up any pretence at balanced budgeting

        In today’s ‘modern’ Britain the private sector exists only to serve the interests of the political client state.

        And Labour’s client state is now beyond reform which is the aim of Labour’s plan. To make reform by the Tories an act of political suicide

      • Hope
        Posted January 26, 2019 at 10:23 am | Permalink

        EU students still getting free university tuition while English students given a life time of debt.

        Blaire started the policy of increasing young people going to university to reduce unemployment and allow low paid jobs for his mass immigration policy. Why have the Tory party not reversed this? Mass immigration was and is Tory govt policy, it is not possible for these historic numbers without a deliberate policy behind it. Nor is it possible to lose hundreds of thousands illegal immigrants without deliberately doing so.

      • Lifelogic
        Posted January 26, 2019 at 3:57 pm | Permalink

        Exactly.

    • jerry
      Posted January 26, 2019 at 8:22 am | Permalink

      @LL; “banks are absurdly restrictive and very expensive on fees, margins, terms and loan to values. This especially for buy to lets”

      Good, and if anything they are not being tough enough! Ever more BTL is the problem, not the solution, to both the countries debt mountain and housing problems.

      “Competition is severely lacking in banking they are getting away with murder.”

      There needs to be far greater and deeper regulation of banks, not less! Competition (and having to account to shareholders) is what has brought the industry to were it is today, mutual building/savings societies on the other hand appear to offer better deals.

      “worse still about least half of the degrees have little of no value anyway.”

      Indeed if you think only STEM subject are worthy, but that might say more about the thinker than the doer, for example were would most commercial companies be without the skills needed to market the product, from people who ‘wasted’ their education studying the Arts and media etc?

      “Far more people should study while working and learn on the job.”

      I agree, proper apprenticeships and day or block-release are the way forward (back to the future, as they say…), but would that not mean companies having to dip into their own profit margins, not passing the training costs to either State or employee?

      There also needs to be far better retraining schemes for the mature (returnee/would-be) student, and why not put the OU course programmes back on the BBC, thus not only publicising an alternative (cheaper) routes to a degree other but also helping to increase general populations education as others choose to dip in and out of the content informally.

    • Andy
      Posted January 26, 2019 at 8:45 am | Permalink

      Your remarks show a staggering lack of understanding of the real world for just about everyone under the age of 50.

      Buy to Let is a product largely for the baby boomers. It was a way for them to further hoard national wealth. Having left school with few qualifications, they were then gifted free higher education, they bought their own detached homes for £1500, collectively they refused to build more homes as the population grew, they have gold plated final salary pension schemes, they bought up second homes – further pricing their children’s generation out of the market, and then – because they don’t like foreigners- they voted for Brexit, making their children permanently poorer.

      Thank you baby boomers. Your generation has failed.

      • Roy Grainger
        Posted January 26, 2019 at 9:35 am | Permalink

        Another missive from Angry Andy. As he was boasting the other day about how much money he had (so he could easily afford higher prices after Brexit) it seems the economy has also worked well for those in their late 40s.

      • Jagman84
        Posted January 26, 2019 at 10:04 am | Permalink

        If Gordon Brown had not raided Company pension schemes in such an aggressive way, the need to find a way to source a retirement by other means would not exist. BTL, was(and still is) the only stable & sensible way to achieve it. In time, properties will be passed on to sons and daughters, so the ‘stolen wealth’ will cascade down the generations. The Government will collect their death taxes and a source of quality accommodation (for those who choose to rent) will be maintained. Unfortunately for you, your parents will probably leave their wealth to the dogs home, seeing as you hate them so much. I certainly would!

      • jerry
        Posted January 26, 2019 at 10:20 am | Permalink

        @Andy: Whilst your remarks show a staggering lack of understanding of the real world for many, perhaps the majority, of the baby boomer generation, your remarks might be better aimed towards the baby boomer generations parents!

        What is more, when Generation X had the opportunity to put right what you believe went wrong, by electing the Blair government, all that happened was gesture politics or war.

        Thank you Generation X. Your generation has failed…

      • Hope
        Posted January 26, 2019 at 10:27 am | Permalink

        EU students still getting free university tuition while English students given a life time of debt. Why should take places from U.K. Students, they are our competitors!

        Blaire started the policy of increasing young people going to university to reduce unemployment and allow low paid jobs for his mass immigration policy. Why have the Tory party not reversed this? Mass immigration was and is Tory govt policy, it is not possible for these historic numbers without a deliberate policy behind it. Nor is it possible to lose hundreds of thousands illegal immigrants without deliberately doing so.

      • bigneil
        Posted January 26, 2019 at 10:37 am | Permalink

        Voting Brexit made their children permanently poorer? What would Remain mean? Ruled by Brussels, who would undoubtedly increase our daily contribution manyfold. And with the borders gone, Merkel would have invited millions into the EU and then directed them all to the UK, where they would all be “entitled” to sit back in their taxpayer funded houses watching their English slaves going to work and pay taxes, just to keep the new arrivals nice and comfy.

      • Anonymous
        Posted January 26, 2019 at 11:00 am | Permalink

        To Andy’s 8.45 (at risk of feeding the troll.)

        – Generation X started the BTL craze. Your generation.

        – Boomers did not get free higher education. They were kicked out of education at 14. There were very few university places. Degrees were ALL real in those days.

        – Homes may have cost £1500 but wages were £400 pa. Interest was 7%.

        – Mass immigration was introduced because (so Labour say) THE POPULATION WAS GOING DOWN.

        – The pensions were raided by Gordon Brown (first by Norman Lamont.) If they got into BTL the ask yourself why ? Ask why so many are driving buses and working tills aged 70 if those pensions are so great ?

        – Boomers dislike foreigners. Your attempt to deligitimise the referendum. We were already multiracial and getting along fine with it until John Major and Tony Blair threw open our borders and accelerated immigration to mass levels, unprecedented in history.

        • Anonymous
          Posted January 26, 2019 at 12:44 pm | Permalink

          Incidentally. The only Boomer I know who has a property portfolio voted Remain and he was quite open with me why he did it.

          He views mass migration as more customers for his scarce resources. I view mass migration as more competition for scarce resources. It really is nothing to do with any dislike of foreigners – I like most of them very much indeed and one who is Asian is to be my beloved daughter-in-law.

      • a-tracy
        Posted January 26, 2019 at 11:24 am | Permalink

        The minimum school leaving age increased from 12 to 14 in 1918, to 15 in 1947 and 16 in 1972. Please don’t make the mistake of believing all of these people are of inferior intelligence, don’t confuse intelligence with education. My children have been brought up to respect everyone and not underestimate anybody and it has stood them well to value people rather than certificates.

        Overall participation in higher education increased from 3.4% in 1950, to 8.4% in 1970, 19.3% in 1990 and 33% in 2000.15. Andy, when it was free there were many less teenagers allowed to go. Often your higher education was provided at your own expense after work, or by your employer during and after work.

        • Lifelogic
          Posted January 26, 2019 at 4:51 pm | Permalink

          School leaving age now seems to be about 22+ for the 50% who go to university. Many if not most of the degrees are at a A level standard or lower. 50% of people going to “University” have 3 Ds at A level or even lower. They should be working and perhaps resitting at night school before going to university at other peoples’ expense.

          Much to be said for working and night schools. Which my father did back in the fifties & sixties and my mother taught at.

      • sm
        Posted January 26, 2019 at 11:47 am | Permalink

        And you, Andy, need to grow up and out of that hatred you express to and about everyone who dares to disagree with you.

      • Steve
        Posted January 26, 2019 at 12:00 pm | Permalink

        Andy

        “because they don’t like foreigners- they voted for Brexit,”

        Some foreigners are good for the country, i.e Poles, Eastern Europeans. So your wasting your time trying to accuse us of xenophobia.

        Furthermore the baby boomers on massive pensions you talk about usually buy property in Europe, Spain, Portugal etc, so they are more likely to be against brexit. Another ‘black is white’ fact-less comment from yourself.

        “Thank you baby boomers. Your generation has failed.”

        A final salary pension, perhaps golden handshake too, property in the Algarve etc ?…….Does’nt look to me like they failed, far from it.

        I suggest you lose that chip on your shoulder before you do yourself a mischief, as you will have to make life changing decisions in the future, which are not best served by your current attitude.

        ‘If only I had done differently’ is where you’re heading.

        ( & quit picking on pensioners, it won’t win you any friends. Try learning from them instead )

      • agricola
        Posted January 26, 2019 at 1:25 pm | Permalink

        Why are you still here?

      • Posted January 26, 2019 at 2:54 pm | Permalink

        And there we go again. Andy – a typical remainder. No comment without an insult.

        If the baby boomers ”failed” how come you complain about their wealth at the expense of YOUR generation? It is because of baby boomers that there are many young people able to buy rather nice homes. The fact that you aren’t one of them has obviously addled what little brain you have, through envy and spite.

        Perhaps when you make sweeping statements about people, you might remember that many of us Brexiteers are of mixed race and resent very much indeed your shallow and uninformed comments about our ”not liking foreigners”, when it is OUR families whom you denigrate. You are offensive in the extreme.

      • Rien Huizer
        Posted January 26, 2019 at 2:55 pm | Permalink

        Andy,

        Restrain yourself. Comment on the absurdities of Brexit, from your youthful perspective but do not pick a fight with the politically most powerful generation in your country. Better to wait until you have reached a more mature age..

      • Martyn G
        Posted January 26, 2019 at 3:40 pm | Permalink

        So all those born between 1946 and 1964 are now responsible for the brexit decision – which is to say all those between the age of 45 and 73. Since by your reckoning they all bought a detached property for £1500 and bearing in mind that the last time it was possible to do so was in the early fifties, some of them must have been only 4-8 years old at the time. Best shift back to blaming all those of pensionable age at the time of the referendum Andy.

      • Lifelogic
        Posted January 26, 2019 at 3:59 pm | Permalink

        You really do not understand anything much do you?

      • David Price
        Posted January 26, 2019 at 4:32 pm | Permalink

        On 25th July 2018 you claimed you could sell one of your houses if necessary to fund your care, so are you one of the BTL landlords you appear to despise or are these holiday homes denying roofs over the heads of the deserving young.

        A fairly standard detached house in Bristol cost my father more than £1500 in 1955 and my first house, again outside London, cost more like £150k in 1980.

        Yieldit analysed the demographics of it’s buyers last year and found the average age of a BTL landlord was 41 for residential properties and 44 for student accommodation. So it appears it is your generation pricing your own children out of the market.

        You clearly have a tenuous grasp of reality.

        • Andy
          Posted January 26, 2019 at 8:56 pm | Permalink

          I only have one house in the UK. I have two in France – in areas with no housing shortages. Next.

          • David Price
            Posted January 27, 2019 at 8:05 am | Permalink

            Based on your history of fabricated, racist and ageist bigoted commentary on this blog do you seriously expect anyone to take your word for anything – without proof.

            The fact remains it is your generation that is pricing your own children and the baby boomer grandchildren out of the property market.

      • Yorkie
        Posted January 26, 2019 at 7:00 pm | Permalink

        I love foreigners. I am a Brexiteer Andy. I pity their health services which have been selfishly and imperialistically skill and brain drained because of Labour policies of open borders and encouragement of the dismantling of southern European infrastructure, also workers: plumbers, electricians, taxi-drivers, truck drivers (in acute short supply). No carers for their young and old and disabled, the tiny home owners suffering negative equity and facing eviction unless they send their children to work in Germany, UK and France.
        All is going well for the National Socialism of the EU. Brexit will break their onward march of poverty and despair across Europe.

      • Dame Rita Webb
        Posted January 26, 2019 at 7:04 pm | Permalink

        “Having left school with few qualifications, they were then gifted free higher education” Eh? How did they get into university with few qualifications? I thought unconditional offers for degree places were only a recent phenomena? Also why are O and A level exam papers from the 60s and 70s a bit too difficult for the youth of today to understand? You might find it a bit easier to find a decent job and buy a house if you did not have to compete with the rest of Europe on your own door step like we did. Open borders and the free movement of labour are wonderful things aren’t they?

    • George Dunnett
      Posted January 26, 2019 at 8:50 am | Permalink

      Thanks for raising the issue of buy-to-let investors Lifelogic. I’m very happy to see these people getting squeezed.

      Many buy-to-let investors in London are now selling up, this has pushed the value of certain property types (new build and ex-local authority flats) down. This is fantastic news. Why? There is no greater pleasure for me than seeing a first time buyer buying an ex-buy-to-let property. Some are even buying the property off their landlord.

      Based on their loan amount, the mortgage on the purchase will always be less than the rent. This gives the owner occupier spare cash to use elsewhere and a home they can call thier own. A win-win!!

      There’s more…

      Since owner occupiers move house more often than if a buy-to-let investor just simply bought the property and kept it for 20 years ( which is often the case), more people will benefit from living in the property. This facilitates a more mobile work force that is great for business.

      Buy to let investors are a drag on the economy. Anything to help owner occupation must be applauded. Seeing a young couple paying £2,000pcm and the landlord turn up in a top of the range German car makes me sick!!

    • Anonymous
      Posted January 26, 2019 at 10:40 am | Permalink

      My medical student son completes his five year degree with £80k of debt.

      I think he would have been a lot better off choosing another career. He will not earn decent money until his eighth year having not earned anything at all for his first five (seven if you include sixth form.)

      It is no wonder that Scotland voted Remain. Clearly they think being in the EU works very well for them – no thanks to the English taxpayer funding their degrees and their inheritances (elderly care fees.)

      • Lifelogic
        Posted January 26, 2019 at 5:05 pm | Permalink

        You son has been frugal to keeps it that low!

        With almost a monopoly as employer the NHS can get away with fairly low salaries. Even the top consultants can be on well under £80K or so, though many they do make more in private practice on the side. So in perhaps 40 years of work you might earn only circa £2 million, less tax and NI, less the £80K debt, plus interest, less the costs of getting to and from work ….. leaves perhaps £1 million. It does not go very far over 40 years with housing cost, cars, children, heating, lighting, food, council taxes, wives, holidays and the likes. Not much change of sending your children to Eton or similar!

        About 50% of those graduating in Medicine in the UK go on to get other non medical jobs it seems (or go to Australia or similar). So rather a waste of public money training half of them to become doctors!

      • margaret howard
        Posted January 26, 2019 at 7:38 pm | Permalink

        Hang on a minute. England and Scotland are both in the EU so it is their and our own governments who had a choice as regards financing student education, nothing to do with the EU.

        • Fedupsoutherner
          Posted January 26, 2019 at 8:45 pm | Permalink

          Yes but Scotland receives more per head than England.

          Having just moved back to England from Scotland after 15 years I am amazed to see that Sunday trading hours are a lot less in England. SNP???

        • Lifelogic
          Posted January 27, 2019 at 2:49 am | Permalink

          The EU rules force the UK to treat EU students the same as UK ones so all they get the soft loans. They are however much less likely to actually repay them. Scotland actually treat Scottish and EU student far better than they do English students.

          British students (who are living outside the EU prior to going to university) do not even get soft loans. Yet an EU student who has never even visited the UK does.

    • agricola
      Posted January 26, 2019 at 10:54 am | Permalink

      Quite correct LL. There is too great a disparity betwee the returns on deposits and the cost of borrowing. It comes about because of the lack of competition between banks who have a government sanctioned monopoly.

      • Lifelogic
        Posted January 26, 2019 at 4:53 pm | Permalink

        Indeed.

    • Ed Mahony
      Posted January 26, 2019 at 1:53 pm | Permalink

      @Lifelogic,

      Interesting.

      Are you talking about how this affects people personally or the country’s economy as a whole – or both?!

      If it affects the economy adversely, can you please explain why (I don’t disagree, I’m just interested).

      Thanks.

      • Lifelogic
        Posted January 27, 2019 at 3:00 am | Permalink

        Both. High taxes are nearly always damaging as people and businesses spend and invest money so much more efficiently that government who are spending someone else’s money on something for some one else. So they care not what they spend or what value they get. Also they waste much of it in the collection and distribution process. Lack of competition in banking is again hugely harmful to business growth and their ability to be productive and compete. As too is over expensive green crap energy.

        • Ed Mahony
          Posted January 27, 2019 at 10:26 am | Permalink

          ‘Lack of competition in banking is again hugely harmful to business growth and their ability to be productive and compete’

          – Is there anything the government can do about this?

          I imagine this affects the consumer market too, because the higher the cost to borrow, for consumers, the less you’re bound to borrow and spend?

  3. Excalibur
    Posted January 26, 2019 at 6:32 am | Permalink

    And who is responsible for damaging ‘high and increased transaction taxes; a credit squeeze, and changes to other tax arrangements’ — the Chancellor, Philip Hammond. This arch Remainer has suggested he may resign in the event of a No-deal Brexit. What a double bonus that would be…….

  4. Lifelogic
    Posted January 26, 2019 at 6:35 am | Permalink

    We have, thanks to Osborne and Hammond, the highest taxes for forty years. But where is this money going. The police have largely given up on most crimes, beyond issuing a victim of crime letter and a crime number. Public loos and libraries are nearly all closing, the NHS is often appalling – “shortening the lives of 456 people” at Gosport hospital (etc ed). What are we paying all this tax for lunacies like HS2 and gold plated pensions and salaries for people largely doing nothing of any value it seems.

    High taxes are, of themselves hugely damaging to the economy as are idiotic employment laws and red tape. People and businesses are far better at spending and investing their own money than governments ever will be. About three times as good many economist find. Government thus waste about 2/3 in the system of collection and allocation, then they spend it usually on complete nonsense. Renewable energy subsidies, Gosport Hospital and HS2 for example.

    • Lifelogic
      Posted January 26, 2019 at 6:55 am | Permalink

      Worst still the only real alternative to the current dreadful, tax and regulate to death government (led by a disingenuous, socialist, remainer & massive electoral liability) is a Corbyn/Mc Donnall/SNP one that would be a total and utter disaster. May is going to kill the Tory party, revive UKIP, split the right of centre vote and give us a vassal state Brexit and Corbyn too if she is not stopped.

  5. Little Englander
    Posted January 26, 2019 at 7:22 am | Permalink

    AT THIS TIME I am not sure that people give a ‘tinker’s damn’ about ” the bank” and what it does or does not do! AT THIS TIME the ONLY important thing to focus upon is leaving the EU when we said we would – no blame game no retribution – just LEAVE and move on and by leaving everyone will pull together and push the Country forward to success -there will be no other choice. Having left – to re-apply for ‘membership of this club’ will mean swallowing the Euro and accepting ALL that goes with it including loss of our Sovereinty but THEN if you want that option the UK MUST be a dominant power within this presently hugely dysfunctional, wasteful organisation so that we change it to be truly democratic in the way that it should be and get rid of ‘elitist’ self-serving elements ‘guiding it’ (for profit) alternatively change it back to what it was EEC a non political group of trading Nations. Frankly it would be easier to just leave. Half in is the worst of both worlds.

  6. jerry
    Posted January 26, 2019 at 7:26 am | Permalink

    “[the BoE] now acknowledge that there has been no worrying increase in consumer debt as reflected in credit card, overdraft and other borrowing”

    Since when, 2015, 2010, 2001, 1979, 1950, or might it have been 1900?… Of course it might have been since 2017, if so it tells us nought!

  7. Richard
    Posted January 26, 2019 at 7:54 am | Permalink

    It’s a shame you don’t listen and act on more of their expert opinions.
    Experts are invariably more accurate than amateurs or those paid by right wing lobbyists.
    We could soon discover their estimate of the impact of a disorderly brexit was also accurate.

  8. Ronald Olden
    Posted January 26, 2019 at 8:03 am | Permalink

    Broadbent didn’t merely exclude Student Debt from his numbers. He excluded car finance as well and the fact that within his narrower definition, consumer debt is no higher as a proportion of income than it was 25 years ago, is misleading.

    Broadbent however was meticulously honest. He went on to say that were risks to personal contract purchases used to buy cars (debts not counted in his numbers), but they were skewed towards the lender rather than the consumer.

    But that still means the debt is in the system, and someone is bearing the risk. It might also make it more likely that the borrower will default.

    If large numbers defaulted at the same time it would flood the market with unsaleable used cars and the security (such it is) would be gone.

    Suggesting that mortgage debt is sustainable simply because the interest payments are affordable at our present freakishly low interest rates is disgraceful. The banking system has to be able to survive a rise in interest rates to, at the very least, historically normal levels.

    Some of these loans are going to be with people for the next 30 years during which the value of their security might rise very little, of even fall

    Broadbent however was again honest and repeated the warnings given by Carney about the parallels which now exist between the leveraged loan market and subprime mortgages that defaulted 10 years ago and triggered a global financial crisis.

    British banks are less exposed to the leveraged loan market than they were to the subprime market a decade ago. But there’s still a noticeable risk.

    Mortgage loan books were rescued ten years ago because there was so much leeway available to cut interest rates and make the mortgage loans affordable. There is now virtually none. You can’t charge interest rates of less than zero.

    The fact that nearly half the student loan book is likely to default with the taxpayer picking up the bill does not mean that it’s not ‘consumer debt’. It simply means that it’s the worst consumer debt of all i.e already expected to default.

    Which is why the ONS has insisted it gets added to the Budget Deficit. Until a few weeks ago John Redwood was going about his merry way demanding yet more government borrowing whilst quoting budget deficit numbers which excluded altogether this already near dead debt.

    If a company accountant did that he’d be prosecuted.

    The fact however that the Bank is now satisfied that debt is sustainable (whether it’s right or not is another matter) is a vindication of its’ policy and analysis to date. Not a cue to become more reckless.

    The main reason new car sales have slowed back to where they were five years ago is because of regulatory and model changes. There’s no point in buying a new car if the model is just about to be updated

    And perhaps people are gradually getting the message that there’s no gain to be had in wasting their income endlessly borrowing to replace cars long before they’ve worn out, and keeping car importers, foreign car manufacturers’ lavish car dealerships and finance companies in the style to which they’ve become accustomed.

    People instead see benefits in spending it on services here, which has the further advantage of keeping the money circulating in their own locality and within the UK.

    If we spend more on cars and the interest on borrowing the on the money required to buy them, we have less to spend on locally generated services.

    Reply Do not lie about what I write. I wish to spend more and tax less utilising the savings on EU contributions. Your comments would be better if you treated my approach fairly and if you did not always seek to post an article on my site longer than the original post

    • Posted January 26, 2019 at 2:59 pm | Permalink

      Well said, Sir John. Perhaps you should just bin such posts, and not allow the oxygen of publicity to someone ill informed with his own agenda, who simply wants to lecture you, and us.

  9. formula57
    Posted January 26, 2019 at 8:18 am | Permalink

    Would a further cheer be appropriate to acknowledge that Deputy Governor Broadbent’s views seem to have been formed despite Brexit *as the BBC would say)?

    His conversion comes too late to halt my call for an independent body, one more in tune with the economy, to set credit restriction measures.

    • Rien Huizer
      Posted January 26, 2019 at 2:53 pm | Permalink

      This is as independent as you are likely to get.

  10. Dominic
    Posted January 26, 2019 at 8:30 am | Permalink

    The central bank of the UK has worked tirelessly to incite fear and uncertainty with their pro-EU propaganda. The have acted partially and with political malice.

    Their mandate is offered to them so that they may act without recourse to political activity and to remain independent and to resist fiercely political pressure to act to accommodate political considerations. They have acted in defiance of that and they have done so willingly and with relish

    They deserve not one iota of praise.

    Their reputation’s been trashed. They have been exposed for what they are. Simply an extension of the Europhile political construct. That’s not reason to offer up our approbation but a reason to condemn what the bank’s become.

    We really do need a purging of the body politic from top to bottom. To wash away the poison of New Labour and Common Purpose from our entire public infrastructure

    • Posted January 26, 2019 at 4:41 pm | Permalink

      Very well said indeed, while you are about it, what should be done with a broken Parliament.
      As there will be almost no need to vote anymore, given the way this government ditched its Manifesto, and have gone ahead with just what They want.
      If we have no representation, for the people, are we become a Totalitarian Society ?
      We must hold our breath for Leave with No Deal only WTO is the best fit

  11. Pete Else
    Posted January 26, 2019 at 8:30 am | Permalink

    A central bank equals central planning. Control of the money supply by that central bank means that bankers own the economy and run it for their benefit not ours.

    • Mitchel
      Posted January 26, 2019 at 1:38 pm | Permalink

      The cabal of western central bankers (who all seem to be scions of a certain investment bank that our host does not like us to mention by name) were intended to be the new politburo post the fall of the Soviet Union.They thought they would be operating a monopolist system(“the rules-based international system”so-called),with Russia falling into line and maoist China then an irrelevance.

      However,Russia and China,together,are developing their own alternative system,so,short of military conflagration,it’s not going to happen.

      What you are left with is “(Corporate)Socialism-in-one-hemisphere”(to coin a phrase!)and that is unlikely to work any better than Socialism-in-one-country”did.

  12. Baz Lloyd
    Posted January 26, 2019 at 9:09 am | Permalink

    I wonder if Anna Soubry has a car. If so God help us.

    • Know-Dice
      Posted January 26, 2019 at 1:17 pm | Permalink

      We know that she only has 863 votes out of 74,013, not sure about the car though!!!

      • Know-Dice
        Posted January 27, 2019 at 11:34 am | Permalink

        I should correct those figures 🙁

        863 majority out of a total 74,013 votes cast…

    • Prigger
      Posted January 26, 2019 at 7:14 pm | Permalink

      Anna Soubry cannot help her opinions. We do not awake in the morning and declare “I have decided to have this opinion about…..”
      Our opinion just appears….. miraculously, beyond our conscious control.Always.
      I’ve wondered about this for some time, consciously.
      Now, I have finished wondering.
      Time to write.
      It is time she thought perhaps how she has worked herself into a box. Into the corner of The House. Totally at odds with the electorate she depends upon for her possible re-election. The clock is ticking. She has “lost” more submerged, her interconnectedness with reality. Worse, one is sure she knows it but cannot dig herself out but piles more dreams on top of clear thought. Topsy-turvy!

  13. Bryan Harris
    Posted January 26, 2019 at 9:16 am | Permalink

    A hint in the right direction, but how far can we really trust the anti-Brexit BoE while Carney heads it….?

    Student loans, brought by labour in 1998, are mere examples of how socialist polices come back to bite us in the rear. They haven’t done anything to encourage a better educated professional class, and indeed have helped to dumb down the whole area of education.
    Time to change all of this, but it will never happen while we are paupers within the dreadful EU – Outside we will be prosperous and able to charge appropriate fees to foreign students, while allowing the cleverest UK students to complete Uni without intolerable debts.

    • Merlin
      Posted January 26, 2019 at 10:15 am | Permalink

      Outside the E.U we will be prosperous? Really?

      I think it’s pretty clear we’re leaving to get immigration down and accepting there’s going to be an economic hit. Which is fine. But most people voted for Brexit knowing there would be economic damage. It was all in the leaflet.

      Also there are huge demographic headwinds. For the next ten years or so, the percentage of pensioners in the population will grow as a result of the baby boomers aging. This will lead to great pressure on the N.H.S and pensions.

      Nobody’s fault, of course, though I’m sure whichever government is in power will be blamed for it. Also, this is why I think use of hospices and encouraging people to die at home is in fact probably an even bigger issue that Brexit – as a huge proportion of N.H.S spending goes on the last few months of peoples’ lives.

      • Bryan Harris
        Posted January 27, 2019 at 9:09 am | Permalink

        @Merlin
        “Outside the E.U we will be prosperous? Really?”

        How could we fail to do otherwise, once free of the socialist EU – Providing we don’t let labour back into power, and the Tories become the party we need…

        The EU has stiffled and robbed us for years – If our government cannot take advantage of the freedoms leaving the EU offers, then they are unfit to govern.
        Yes there are major problems to overcome, but they will not get any better until we actually do something about them – getting out of the EU is only the first step – the next step is to bestow some rationality back into our country.

    • jerry
      Posted January 26, 2019 at 3:23 pm | Permalink

      @Bryan Harris: Student loans were the result of a group of Inquiries into Higher Education, more commonly known as the “Dearing Report”, submitted to Government in July 1997.

      Now whilst I fully accept it was Blair’s government who carried forward and actioned the result of those reports, they had actually been commissioned by the preceding Tory government – whilst possible, had John Major won in 1997 I very much doubt his government would have then ignored the Dearing report (considering the changes that had & were already been made within Higher education), indeed the 1997 Conservative manifesto contains this;

      We will ensure consistently high standards and will consult on the development of higher education when we receive the results of the Dearing Review.

  14. Steve
    Posted January 26, 2019 at 9:18 am | Permalink

    Well, as for me, I don’t ever use credit and I live within my means.

    I believe people could actually better their standard of living by not allowing themselves to be pulled in by excessive consumerism and credit.

    But then I’m of the Green Shield generation, who understand the virtue of working to own something rather than having it facilitated.

    • a-tracy
      Posted January 26, 2019 at 11:44 am | Permalink

      I know more people like you Steve than Andy’s parody above.
      The people that I know that have lived beyond their means, taken on too much credit card and car loan debt are under 30 and most of them are busy trying to write that debt off with all sorts of clever cop out schemes that the rest of us have to bail out. I don’t assume all under 30’s are like this because my children and their friends are very sensible so I won’t use a broad brush on a whole generation all I will say is that it seems to be more acceptable to become insolvent or bankrupt with nothing to show for all the debt money they took on than it was when I was under 30.

    • Alan Jutson
      Posted January 26, 2019 at 11:51 am | Permalink

      Steve

      I tend to agree with much of what you say, but as long as borrowing has been sensibly calculated to be manageable, then it should be less of a problem.

      Of course if you need to borrow then it is surely better to borrow to purchase things which are likely to increase in value, or make life or living much more efficient, than to do so on items which depreciate quickly, and which give very limited benefit or enjoyment.

      • Steve
        Posted January 26, 2019 at 5:55 pm | Permalink

        Alan Jutson

        “….make life or living much more efficient, than to do so on items which depreciate quickly”

        Indeed Alan.

        People just don’t seem to grasp that. Especially they don’t seem to realise how planned obsolescence has them by the short & curly’s.

    • Posted January 26, 2019 at 3:10 pm | Permalink

      Well said, Steve.
      Perhaps the Andys of this world should try to live by those principles. He, and his ilk, really don’t understand that the ‘baby boomers’ of this world funded their own pensions and lifestyles by hard work and by avoiding, as you say, ”excessive consumerism” and certainly by avoiding debt. Many shuddered when they had to borrow to buy a house!

      Andy-”I-want-it-all-and-I-want-it-now” wouldn’t get it. (He thinks the EU would get it for him.)

      • Steve
        Posted January 26, 2019 at 5:41 pm | Permalink

        L Jones

        Thank you.

        ”I-want-it-all-and-I-want-it-now”

        Yep, and no good ever comes of it.

        I’ve always held the opinion that personal finance management should be compulsory on the schools curriculum.

    • Lifelogic
      Posted January 26, 2019 at 6:34 pm | Permalink

      Well borrowing for sensible investment can be a very good move. Had I not done so I would certainly be much poorer.

      But you have to be fairly good a picking sensible investments that will outperform the cost of funds significantly and the downside is considered fully, as far as possible.

      With such absurd transfer taxes on houses (thanks to Hammond) it is perhaps often better to borrow more and buy a house you can keep for a long time rather than have to move again later. Even if you do have to let a room or two out as I had to when I first bought. With interest rates about 10% at the time I think!

  15. Alan Joyce
    Posted January 26, 2019 at 9:21 am | Permalink

    Dear Mr. Redwood,

    Advice to Hammond, Gauke, Rudd & Others ‘Considering their Positions’.

    For God’s sake get on with it and spare us your sanctimonious claptrap.

    • Posted January 26, 2019 at 10:27 pm | Permalink

      It’s all about them and self-aggrandizement. One gets the feeling that the people and their fury are just a side-show, and easily ignored.
      Are they really so unaware of the damage they’re causing?

  16. Sir Joe Soap
    Posted January 26, 2019 at 9:24 am | Permalink

    Student loans are indeed a special type of “debt” which should in no way be lumped together with consumer debt when the Bank analyses debt build-up. It’s odd that the state encourages such a build-up in student debt without analysing capability to pay it back, whereas for normal consumer debt and mortgages, affordability is analysed down to pence. Of course this is a kind of investment by the state, but this is done without due consideration as to how that investment is going to pan out. Nobody would invest on a personal basis whereby the asset has no collateral and can go out of business or unilaterally put a hold on dividends at will! If student loans are at the root of this, then there should be more control over these being taken out for courses which are more akin to hobbies than being a realistic investment for the state.

  17. Sir Joe Soap
    Posted January 26, 2019 at 9:30 am | Permalink

    At last it seems that Conservative donors are laughing in the face of Brandon Lewis asking for cash to support T May’s stupid proposals in a possible general election. She’s conned us once, but is clearly stupid enough to think she’ll be able to do the same thing again.

  18. Posted January 26, 2019 at 10:18 am | Permalink

    The latest Project Fear prediction in The Guardian (26 Jan) is that No Deal is likened to Iceland’s volcanic ash chaos in 2010! Let’s put some facts in place.

    Iceland’s GDP per capita in 2008 was US$41,867. Its 2010 low was US$38,594. By 2017, the most recent year for which figures are available, GDP per capita had increased year-by-year to US$51,842. This represents an increase of 34% over the 2010 low and 24% over the 2008 pre-volcanic eruption high.

    There was some economic turbulence caused by Iceland’s volcanic eruption but it was only temporary. I am sure that there would be some turbulence with a WTO withdrawal. The UK’s recovery is, in my view, likely to be all the stronger when the benefits and freedom to make our own decisions kick in. The problem is that too many politicians cannot see beyond the next election.

    • Steve
      Posted January 26, 2019 at 8:34 pm | Permalink

      Phillip Stephens

      “The problem is that too many politicians cannot see beyond the next election.”

      Though I sometimes wonder if some of them know they’re done for, and act the way they do out of spite. Not all politicians, just some.

  19. Den
    Posted January 26, 2019 at 11:11 am | Permalink

    It makes a change for the BoE to come out with something that makes sense. Of course it came from a Deputy and not king Carney, the raving europhile, who always talks down our country. When is he due to leave?

    • Posted January 26, 2019 at 10:31 pm | Permalink

      It makes one wonder though – the Deputy must have been given the go-ahead by his boss. Is it because Carney couldn’t be seen (or couldn’t bear) to admit to being wrong?

  20. acorn
    Posted January 26, 2019 at 11:46 am | Permalink

    “The Impact Of Interest Rate Targets On The Economy Is Indeterminate”. L Randall Wray. Also he says that contrary to popular belief, raising interest rates in modern high debt economies, tends to be inflationary. That because it increases Treasury/Central Bank payments into the private sector.

    There is no such animal as an independent Central Bank in a fiat currency economy. It is always umbilically connected to its fiat currency issuing Sovereign Treasury. The Central Bank has no tools to enable it to hit interest rate targets, it can only supply and drain “reserves” from the private sector and pray. When it changes short term rates, it has little idea of what will happen to long term rates.

    It would be more honest to bring the Central Bank back under Treasury management and let it operate purely as a national clearing house for the Treasury and Banks; lending at a small margin not far above zero. Leave control of the economy to dynamic fiscal policy, not Budget Days.

  21. Christine
    Posted January 26, 2019 at 11:52 am | Permalink

    As with most things that Government touch, they have made a mess of university education. In a lot of cases students attend a low grade course coming out with a worthless degree. On top of this, they have lost 3 years of earnings and pension contributions. The country has lost 3 years of tax revenue plus the eventual write off of the loan. I expect Blair’s aim to get 50% of youngsters into university was more about reducing the unemployment figures. Now we are in the perverse situation whereby employers request a degree when in the past one wouldn’t have been necessary, making the gaining of the degree a necessity. The only gainers out of all this seem to be the Universities.

  22. a-tracy
    Posted January 26, 2019 at 12:00 pm | Permalink

    John, isn’t the truth on student tuition fee loans to English students that contrary to ‘a high % will be written off’ the problem was that too much of it was paid off on Plan 1 before 30 years! This before the fees and interest went extortionate thanks to the Conservative government in 2012. It is a 30 year tax of 9% on English graduates, rather than a loan and people that whinge about a proportion not being paid back should remember that before this rip off interest and fee structure in plan 2 the 100% cost was borne by a majority who didn’t get the benefit of a higher education because it was rationed and any pay back is more than it was before 1997. It’s mainly successful middle class kids that will be paying their 9% tax for 30 years and will pay back much more than their course cost to deliver and that’s the plan Willets and Osborne and the Conservatives England voted into power punished our children for.
    The Labour governments ‘everyone can have everything for free’ once they get into power is a complete and utter insult to those children paying up on their graduate tax and those that have completely paid back loans and if actioned will allow employers to drop pay rates for Graduates and leave a tranche of people unable to compete with debt free grads coming up behind them, it just shows you the lack of thought on taxes and balances that Labour do, because if new grads don’t pay their 9% grad tax who will be paying, do they think they can screw the plan 1 and 2 grads when they’re already paying 41% tax over £17,000 and £25,000? Do they think pensioners will be able to pay? the majority not working in the public sector and thus without final salary pensions or decent private pensions because Brown pillaged them and the Tories are planning another raid. Ho ho ho. That’s going to work – NOT!

  23. acorn
    Posted January 26, 2019 at 12:04 pm | Permalink

    BTW. The following BoE charts rarely get past moderation on Brexiteer sites. I won’t supply a link because that kills most of my posts.” Latest developments in the Bank’s money and credit statistics A visual summary “.

    So let it be clear; the fact that a lot of the lines are trending down since the referendum, has nothing to do with the referendum and is purely coincidental. It is all that Hammond bloke’s fault.

    Reply I have explained endlessly that the Bank decided to tighten money and credit from March 2017 and have done so, and I have explained why I think they are wrong.

    • acorn
      Posted January 26, 2019 at 5:27 pm | Permalink

      The Central Bank is definitely wrong. Publish my other post of 11:46 this day and we can start educating your resident band of commentators to this site; how the system actually works and why they are destined to always lose out to the 1%.

  24. Steve
    Posted January 26, 2019 at 12:11 pm | Permalink

    JR

    “I wish to spend more and tax less utilising the savings on EU contributions”

    Sounds good to me.

    I was going through this month’s diesel costs earlier, my God I didn’t realise how much tax I’m being charged ! Total rip off.

    • Lifelogic
      Posted January 26, 2019 at 5:09 pm | Permalink

      Circa 80% of the pump price is tax last time I looked. Yet still cars far cheaper than trains and far more flexible in general even with only one person in them.

  25. Rien Huizer
    Posted January 26, 2019 at 12:15 pm | Permalink

    Mr Redwood,

    Mr Broadbent’s speech is fine. One should see this through either the Bank’s responsibility for financial/prudential regulation (and with it financial stability in a country/currency where the main banks are still far too large to fail without grave consequences) or for its responsibility for monetary matters.

    It is sometimes hard to disentangle those responsibilities as they tend to combine nin their results for credit conditions facing the public and espoecially the consumer.

    Imo Mr Broadbent does not advocate genuine relaxation of policy but wants to assure that perceived high levels of debt are less of a warning signal than generally believed. Especially the removal of -say 70% – of student loans is relevant for assessing household debt and its growth. He does not say that consumer lenders should eliminate student loans from their lists of pre-existing debt when approving credit applications (and those lenders would not rely on Mr Broadbent anyway. I suspect that lenders will not be too generour to those borrowers of student loans that are most likely to fail (the 70% statistically transferred to the government. So these former students will remain unpopular with lenders who also know that if the prospective borrower becomes more affluent, student loan repayments will become more relevant. Mr Broadbent can be confident that apparent high consumer debt is not threatening to his banks etc but that does not ease private credit supply.

    As to mortgages, one should separate the” buy to let” market (an investment decision) from the ordinary user-occupied one (a fundamental household decision) Gvt policy re buy to let is more complicated than ordinary housing credit, because when the net rental returns are cyclically high, especially entrants to the housing market are affected in two mutually reinforcing ways: houses are more expensive than they would be without BTL landlords and high rents might come down a little through BTL but that takes a long time in the UK market (I am more familiar with the Australian situation I must admit). Meanwhile entrants feel boxed in.

    All in all, this is q good an useful speech, containing a few aspects that are genuinely novel in regulatory thinking (I guess mR Broadbent had an eye on the rating agencies especially when presenting his revealing statistics and novel, but plausible theory) but I did not detect a change in stance re policy in areas like bank supervision and macro prudential approach and I would not expect any.

  26. Dominic
    Posted January 26, 2019 at 12:17 pm | Permalink

    And while we’re on the subject of Mr Broadbent, maybe someone should inform him that a deal on Brexit is not Brexit. If Brexit is not achieved through a reversion to the WTO rules then it isn’t Brexit.

    An agreed deal on Brexit mean exactly that, a UK-EU deal. A deal to compromise on Brexit, a capitulation on Brexit. A deal in which the EU demands that the UK agrees not to act as an independent, sovereign nation but to act in accordance with EU rules, regulations and policy diktats

    So Ben Broadbent shouldn’t be taken seriously on any matter whatsoever

  27. mancunius
    Posted January 26, 2019 at 12:22 pm | Permalink

    “It [a student loan] is more of a graduate tax on success.”

    There are also a large number of people going to universities just because their friends do, marking time with useless degrees. For them, a student loan is an incentive not to get a steady job, so they’ll never risk having to pay it back.
    The HoC Library stats show that the current average debt is £32,000, that only 30% of students repay their debt in full, and that the current value of outstanding loans is £105bn, expected to rise to £450bn by the middle of the century.
    https://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN01079

    Do we as an economy really need this Somme Offensive, throwing all and sundry into HE regardless of fitness and of outcomes, and of its vast cost?

    • a-tracy
      Posted January 26, 2019 at 8:44 pm | Permalink

      ‘The average debt among the first major cohort of post-2012 students to become liable for repayment was £32,000. The Government expects that 30% of current full-time undergraduates who take out loans will repay them in full.’

      The Conservative government in 2012 ensured that a high % of current grads won’t be able to pay their loans back with 6% interest from day 1 accruing on the loan (a new unexplained condition not applicable in plan 1). I’d like to know what % of plan 1 grads aren’t expected to repay in 30 years (when maintenance grants were still given plus lower tuition fee borrowings)? Of those grads that aren’t paying back pre2012 plan1 loans what % are EU returners that can’t have attachments of earning applied? Also, What % that have had loans for 20 years have fully paid off their loans? Especially as the fees were originally only £1000pa?

  28. Lee Taylor
    Posted January 26, 2019 at 1:15 pm | Permalink

    I still think the PCP loan scam will unravel. I can recall the days when seeing a Rolls Royce on the roads was something of an event. Now I see Bentleys, Astons, £70k BMWs etc. all the time. Who has that kind of cash to throw away on a depreciating asset?
    I dont object to people buying under these scheme’s, good luck to them if they can afford it, but I do think it needs more regulation. If we do get an economic downturn there are going to be a lot of people burned by these deals along with a lot of bankrupt car dealers.

  29. Ed Mahony
    Posted January 26, 2019 at 2:41 pm | Permalink

    God blessed Ancient Egypt under Vizier Joseph of Egypt above all because Joseph was a man of prayer. Let’s all please pray for our country right now.

    • margaret howard
      Posted January 27, 2019 at 5:27 pm | Permalink

      It wasn’t prayer that fed the people during a famine but good husbandry by storing surplus grain for leaner times to come.

      Just as today it isn’t prayer that keeps us out of debt but the simple precaution of not spending more than we earn.

      • Ed Mahony
        Posted January 27, 2019 at 10:58 pm | Permalink

        @Margaret

        ‘It wasn’t prayer that fed the people during a famine but good husbandry’

        – But the Bible says that it was BOTH – both the prayer and good husbandry and more that enabled Joseph to do well (the Joseph story being a metaphor for people in any age or place).

        So we’re in no doubt that ACTION is required (and good action). Where there might be a point of difference (I don’t know) in whether prayer works or not. That’s another argument. In my personal experience and what I’ve heard and read about others – it does, and powerfully so, and that more is given to those who pray than for what they pray if the prayer is a good one.

        • Ed Mahony
          Posted January 27, 2019 at 11:04 pm | Permalink

          I also think modern Britain is being plagued, to a degree, by new (and old) Christian heresies (they might be good people, I don’t know, much better than me).

          I strongly believe that the UK would be great again if we returned to traditional Christianity – that gave us so much from the Catholic Middle Ages as well as from Protestant times too (I’m thinking of traditional Christians such as Jane Austen, Samuel Johnson, Edmund Burke, Handel, Sir Christopher Wren, John Donne, and many others – all heroes of mine).

      • Ed Mahony
        Posted January 28, 2019 at 11:05 am | Permalink

        @Margaret,

        I forgot one of my best examples of point I’m trying to make: Joan of Arc!

        Joan of Arc was a young, uneducated peasant woman who commanded a French army to a famous victory, and actually fighting herself in the battle – and in the Middle Ages when women didn’t do this kind of thing (not even today)!

        Joan of Arc is a great example of ACTION in faith AND prayer. She was a devout Christian, later to be celebrated as a saint and patron saint of France!

        The Greeks had brilliant heroes such as Odysseus, Hector, Achilles, and the Romans, Aeneas, for example – but these were all fictional. Joan of Arc was real. She was like a Christian Amazonian warrior.

        She is also a good example of how traditional Christianity is NOT for wimps! (and even the great women and men who lived quiet, saintly lives still suffered).
        She is also a great example of the traditional Christian notion of patriotism developed by St Thomas Aquinas about 150 years before St Joan of Arc.

        I also think our Spitfire pilots of WW2 and, in particular, the Battle of Britain, are our nearest equivalence of Joan of Arc. No doubt many were men of prayer, as was Field Marshal Viscount Allenbrooke, who was certainly a man of prayer, and prayed hard at times such as the Battle of Britain.

        Per Ardua ad Astra

  30. ian
    Posted January 26, 2019 at 3:06 pm | Permalink

    Yes, James, you have it about right, gov debt is out of control with trick accounting, PFI, student loans, apprentice levy and a lot more, take PFI, still, own over 220 billion, they don’t use it anymore, it triples the debt to have it off the books, student loans debt is so big the gov is now borrowing 12 billion a year starting last year to try to get it under control and even with that huge debts will be left to pay for taxpayers of that generation of people, in Scotland they just put it on the debt for taxpayers to pay, which is better than trying to hide it, giving people more spending power which turns in to more growth. They say that student will be over a trillion pounds by 2044.

    That the problem with party politics, all promises and no money, their promises have buried the people in debt and taxes with no end in sight.
    Look at council tax, some areas are paying 2000 pounds a year for the band D and going up year on year now by 5 to 6 per cent a year, in ten years time it will be 3000 pounds a year and not forgetting all the cuts, all cos the gov is totally broke with broken promises and putting as much as they can on your council tax, in Portugal, they pay 200 to 300 pounds a year rates.

    As for the EU, to stay or a deal, to stay will cost an extra 6 billion pounds a year starting in 2021, for a deal, it cost the same as it does now, but they cannot tell you that.

  31. Andy
    Posted January 26, 2019 at 3:50 pm | Permalink

    Did anyone else see an MP named Mark Francois – on live TV – ripping up a letter from the boss of Airbus warning about Brexit job cuts.

    It made great TV.

    It also shows the contempt with which the economically illiterate Brexiteer elite in the Tory party treat real people with real jobs.

    Mr Francois literally demonstrating that his ideologue comes before other people’s prosperity.

    Reply It shows Leavers are fed up with same old scares.

    • Anonymous
      Posted January 26, 2019 at 4:27 pm | Permalink

      So what does the Brexiteer elite gain from all this then ?

    • agricola
      Posted January 26, 2019 at 4:43 pm | Permalink

      Yes this Aibus generated scare story was a black op. Airbus UK principally sell wings to Airbus France. Even in the remainers worst scenario, leaving the EU with no deal and having to trade under WTO terms, the trading would be duty free as with all items in aviation. Put another way, trade would be unencumbered, as it is now.

    • Jagman84
      Posted January 26, 2019 at 5:19 pm | Permalink

      If Brexiteers are so economically illiterate (or possibly innumerate?) then why are you complaining that they have all of the wealth? How useless does that make your ‘young generation’? 44 is hardly young! Hard work and determination is the key to future prosperity. Do it young and enjoy the fruits of that labour in later life. Or a little bit sooner than expected, like me!

    • Ian wragg
      Posted January 26, 2019 at 5:24 pm | Permalink

      Airbus has admitted that the government was complicit in the statement.
      Davos fever I think it’s called.

      • Richard
        Posted January 26, 2019 at 8:51 pm | Permalink

        Incorrect. They have stated the exact opposite, but dont let truths get in the way of your delusions

    • simple soul
      Posted January 26, 2019 at 8:19 pm | Permalink

      The indiscretion was on the part of the German businessman, putting pressure on British MPs to vote as he wanted them to.

      • margaret howard
        Posted January 27, 2019 at 5:32 pm | Permalink

        Indiscreet? Surely it was his duty to warn his workers of the danger to their livelihoods.

    • Rien Huizer
      Posted January 26, 2019 at 10:11 pm | Permalink

      @ Andy,

      He was doing his job. Some people may have liked what he said. I saw it too and, really, it looked like a good play for a specific audience. Part of politics.

    • margaret howard
      Posted January 27, 2019 at 5:35 pm | Permalink

      Reply to your reply: “It shows Leavers are fed up with same old scares. ”

      Are you saying that the head of Airbus is lying about job losses?

      Reply I do not expect any closure of wing factory activity in UK this year.

  32. Dylan
    Posted January 26, 2019 at 4:01 pm | Permalink

    Socialists have warped view of the world.

    They assume that if something’s worth having, the State must give it to us for nothing. And these warped soundbites from socialists are corroding the thought processes of the young.

    John Redwood’s observation that only getting your student loan written off when you can’t pay it back by the age of 50 means that paying some back is a ‘tax on success’ is a perversion of the English language.

    Waiting till you’re 50 to have it written off doesn’t make it a ‘tax on under 50s’ either.

    Losing entitlement to state benefits when you earn money, paying your rent and council tax out of your own wages, rather than out of Housing Benefit, etc:- are not ‘taxes on success’.

    Neither is paying your debts back rather than going bankrupt a ‘tax on not going bankrupt’.

    What are ‘a taxes on success’ however, are the income taxes we have to pay for the vast sums of money that the socialists like John Redwood insist the Government spend and the interest on the money he insists they borrow to pay for it.

    Another favourite ‘tax on success’ that John Redwood advocates, is inflation. He’s all for keeping interest rates so low that we can’t get enough interest on our savings for them to even retain their value.

  33. Richard
    Posted January 26, 2019 at 4:48 pm | Permalink

    Yes. the level of last century germanophobia displayed was just embarrassing. He’s in the ERG isn’t he ? They should just leave the conservative party and join UKIP. Alomh with most of the posters on this site.

    • mancunius
      Posted January 27, 2019 at 12:08 am | Permalink

      “I never dream of telling a German MP how to vote in the Bundestag and I think Mr Enders should pay us the same courtesy…Mr Enders’ intervention is a classic example of the sort of Teutonic arrogance, which is one of the reasons why many people voted to leave the European Union.”
      Fair comment. Another recent example of such blinkered arrogance was the BDI spokesman who claimed (reported in the FAZ at the beginning of the week) that Britain after leaving the EU would immediately sink to the contemptible economic level of Ghana. This is the official representative of the German equivalent of the CBI.
      The word ‘arrogant’ is not at all misapplied. There are many genuinely liberal, open-minded and well-disposed Germans (in my work I come across them all the time) but they are not to be found among the self-obsessed political and industrial classes – in state corporatist Germany those two societal segments are very closely allied.

  34. Posted January 26, 2019 at 5:07 pm | Permalink

    I recently found a series on YouTube which horrified me. It’s called “Can”t Pay? We’ll take it away”.

    It follows High Court Enforcement Agents in their work to recover debts and undertake evictions. I was astonished that they had such powers and equally astonished about the levels of debt people were carrying.

    I also noted the very high numbers of people with rent arrears.

    I would encourage you to watch one episode as it was an eye opener for me.

  35. Yorkie
    Posted January 26, 2019 at 6:46 pm | Permalink

    I guess Mr Carney had his personal reasons for staying a Canadian and then also a British passport holder. Well he has a good reputation in the the Canadian financial system and it has never recovered.

  36. mika
    Posted January 26, 2019 at 6:50 pm | Permalink

    John Redwood seems to think that as long as we’re not facing imminent systemic financial meltdown, we should all just borrow as much as we can get.

    John McDonnell is of exactly the same view He says we should borrow until we can’t borrow any more.

    When Mr Broadbent said that these student loans are different in nature from other consumer credit he was talking in the context of whether they represented a danger to the banking system.

    He thinks they aren’t, and he’s right.

    But the loans are still consumer credit. Servicing and repaying them will weigh on the borrowers disposable income, and on the money they have to spend in the economy in the future, in exactly the same way if they were credit card debt.

    Later on when the expected 45% of the loans default, they will become the liability of the Taxpayer who will have to borrow or pay tax to repay them.

    In that respect they are exactly the same as the bad loans in the RBS balance sheet which the taxpayer has had to pay.

    This practice of politicians inciting the public to saddle their descendents with vast Government debt, unfunded Government commitments, and private debt of their own has to stop.

    Reply Why lie about my views? I have never urged people to take on debts they cannot afford, but I do want people in work with prospects of future real wage increases to be able buy homes and rent cars without restrictive Bank rationing.

  37. Meddy
    Posted January 26, 2019 at 9:22 pm | Permalink

    John Redwood’s complacency over debt, will, in the end result in the election a far Left government in this country and quite possibly either by it, or in response to it, the end of democracy.

    Historically when the money was gold, the state used to rob people by borrowing money off them and then persecuting the people whom they’ve borrowed it off or merely by defaulting.

    This was that main source of persecution of Jews in the UK.

    There was a time when Jews were the only religion which permitted money lending. So Monarchs and locals borrowed off them, spent the money then persecuted them to avoid paying it back

    Nowadays they do the same thing but in a less obvious way.

    Government borrowing and facilitating private debt is a device that politicians use to transfer wealth from future generations who don’t have a vote, to people alive today who do and from some people whom’s votes they think they can rely on, to those whom’s votes they think they need to buy.

    Private debt is as much a potential fraud on future generations as is state debt because the banks are underwritten by the state, the state can print money to bail them out, and the only legal tender is the money the state prints.

    Apart from the economic effects of all this, it’s morally despicable, because it steals from savers and uses the cash to subsidise borrowers. And to add insult to injury, the asset price inflation it causes increases the value of the assets which borrowers have bought with the borrowed money.

    It’s one of the main reason the UK has such a distorted economy. Wealth has been systematically transferred from savers and into the hands of people who’ve borrowed money to buy property which itself is in near fixed supply so benefits most from asset price inflation.

    This is going to create as serious political fracture in the UK at some point soon with young people voting in sufficient numbers to elect a far Left government which they think will put it right.

    And with it not being constrained by EU Single Market, Customs Union laws, and Membership of the Euro as for example the far Left government is in Greece, that government will do as it likes.

  38. Monza 71
    Posted January 26, 2019 at 11:35 pm | Permalink

    I have just “bought” a new car. The deal included a very substantial discount ( the car was pre-registered but had done zero miles ), plus a “deposit contribution” from the manufacturer of £3,500 – providing that I took their finance package which requires only a 10% deposit and 90% financed at a very high 7.5%

    Naturally I took the deal – but only because I can pay off the full amount without penalty after a minimum of three months and get to keep the £3,500 and the two free services that were thrown in. All it will cost is around £130 in interest for each of the three months. The free services alone are worth more than that.

    But I worry about people who aren’t in the fortunate position to turn this kind of deal into a cash purchase after the minimum period. 7.5% is a very high rate compared with a bank loan. Unlike my deal, most of these transactions are based on the very high RRP of a new car and, if the customer get into trouble during the deal – illness or redundancy, for example, they will be told to sell the car and repay the debt. However they would almost certainly end up with a large shortfall, the consequences of which could be repossession.

    In principle I share the Bank of England’s concerns about this kind of deal. They look far too attractive to the average buyer.

  39. Lindsay McDougall
    Posted January 27, 2019 at 11:23 am | Permalink

    “There is no excessive mortgage debt problem out there.” In case you haven’t noticed, part of the reason for that is that many people either cannot afford to take out a mortgage because house prices are too high, or are denied mortgage finance by their bank or building society.

    Most of the people affected are under 40 and it is influencing the way they are inclined to vote. The solution is to raise base rate to at least the rate of inflation and put a tourniquet on immigration, a necessary form of demand management aimed at reducing house prices. Then get rid of all the taxes and interventions, a move that would involve Government minding its own business.

  40. Mike Wilson
    Posted January 27, 2019 at 12:49 pm | Permalink

    The housing market has not been damaged. My son bought a new build for £515k two years ago. The same house type is now selling at £610k

  41. Mike Wilson
    Posted January 27, 2019 at 12:57 pm | Permalink

    My son bought an Apple laptop on 0% credit over 4 years. He could have saved up for 4 years and bought it outright – but, then again, he wouldn’t have had the use of the laptop for those 4 years. At the end of the 4 years he will (presumably) be able to buy another one on the same deal. If he can, it is better than saving up for it and he has use of it for longer.

    My son has a massive mortgage – which he pays 2% interest on. The house has inflated way more than 2% in the two years he has owned it. The mortgage interest is, therefore, ‘free money’.

    He has had two car purchases which he did on some sort of finance. After 2 years his Audi S5 convertible was worth more than the residual value so he bought himself out of the contract and made £2k. He has done something similar on a Volkswagen Amarok truck.

    Although I have never had any debt apart from a mortgage, and discourage him from taking on debt, I begin to wonder whose ideas are right – mine or his.

    • rose
      Posted January 27, 2019 at 9:09 pm | Permalink

      The older generation are making a massive capital transfer to the younger in that they get no interest on their life savings, yet Two Brains has brainwashed the political and media class into thinking inter generational unfairness goes the other way and therefore old people, many of whom paid colossal rates of mortgage interest must be punished all over again.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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