The debt mountain: lenders' rich pickings on the back of low wages and high prices

Workers' Fight workplace bulletin editorials
3 October 2006

This month, the minimum wage goes up to the grand sum of £5.35 per hour, or £3.30 per hour for under 18s... Not that it is possible to live on this pittance. But that did not prevent the bosses' CBI complaining that it was far too much. They said it represented an "unacceptable" 27% rise since 2002!

Unacceptable? Yes, it is unacceptably low, when compared with CBI members pay, that is for sure! The average pay of company bosses went up by 28% over the last year alone. Over the past 4 years it has gone up by 51%! And here, we are talking about executive salaries - which are anything from £1m to £15m per year - compared to the "average" salary of workers of £22,500 per year. And this "average" takes all categories of "worker" into account, including City high-fliers. That means that the low-paid are really paid very "low" indeed. Tesco's boss, for instance, has a total salary of £5.4m, while Tesco employees average out at only £11,500 per year.

A Mount Everest of debt

It is small wonder therefore, that the gap between rich and poor and bosses and workers has been increasing to record levels. It also explains why wages have fallen so far behind real price increases. But above all, it explains why British workers have been accumulating record levels of indebtedness.

"Consumer debt" has reached an all-time high of £1.3 trillion! This is 3 times the level of borrowing compared to 1997, when Labour came into power.

The Citizens Advice Bureau saw 1.25m people in the last year alone who were experiencing a serious financial crisis. House repossessions in the first half of this year were 8,140, the highest in 5 years. But in fact as many as 770,000 people missed at least one mortgage repayment. And nowadays, thanks to the absurd inflation of house prices, mortgage repayments can be so high that they take up more than half of a monthly wage.

But never fear. Not everyone loses out, of course! Obviously, the lenders - banks and building societies and credit card companies - are enjoying an unprecedented bonanza thanks to this mountain of debt. Even if they lend money to people who can never pay it back, they have ways and means to compensate themselves which cover this "bad debt" a hundred times over, like simply increasing their large variety of banking charges and interest rates. And in fact, there has never been such a boom in the number of credit companies or, to be more accurate, in the number of loan sharks.

Wage rises way behind true inflation

Of course, part of the large mountain of debt which now exists may possibly be explained by the flashy lifestyle of a small section of the middle class which just throws money out of the window, both its own and borrowed. But most of it reflects the dire financial state in which the majority of working class people find themselves. And this is precisely because our wages have not been following the real rise in inflation. It is precisely thanks to this, that banks and credit card companies have been able to jump at the opportunity to make billions on our backs through extending "credit".

They lure people into thinking that they are getting a good deal, but the fine print shows that they are actually luring us into a trap. They flash new credit cards in front of those already unable to pay existing loans, offering zero interest credit transfers. But the trick is that they tie people into debt for ever longer periods, so they end up paying back not just 3 or 4 times, but 10 times the amount they borrowed originally. So even if they default at some point, there is no way that the lender loses a penny!

"Stable economy" for whom?

This is just one more reason why the derisory level of wages today is such a disgrace. This is why the pathetic level of wage increases being offered to workers (between 2% and 3%!!) in this year's pay rounds is so totally unacceptable"! How on earth is the average worker - even in a full-time, permanent, job - meant to meet all the increases in housing costs, fuel costs, council tax and public transport, without getting a rise in wages in proportion to these increases? The plight of those on the minimum wage, mostly subject to Brown's increasingly casualised "labour market", is even worse. A 30p/hour increase is a joke, compared to rising costs of living!

Yet in the mean time, Brown and the politicians on all sides are still singing us this lullaby about the most "stable economy" in decades!! But stable for whom, exactly? For all the lenders, for the big shareholders, for company directors, for the wealthy, sure, the pickings have not been so rich for a long, long time. But for the rest of us, their "economic stability" only means getting poorer and poorer. That is, unless we do something about it.