Let’s take a break from Brexit and think forward to Christmas. Tis almost the season to… consume the planet, to buy environmentally damaging rubbish we don’t need and, for many people, to go into debt in order to pay for it.

I can’t quite pinpoint when it happened but Christmas transformed from a celebration of family, where real presents were exchanged between people who had saved up for that special day (it stopped being a religious celebration for most decades ago), into a festival of unrestrained, unnecessary and unwise consumption. I say festival but, looking at the mad rush to buy things on Black Friday and Cyber Monday (both of which now seem to last more than a week), maybe calling it a riot of consumption would be more accurate.

Wages have been depressed since the 2008 crash yet people kept on consuming and the only way to do that was to borrow. This is why personal debt has been rising to record levels fuelled by low wages and low interest rates. But interest rates will have to rise, especially if Brexit goes ahead. The Brexit effect of weakening the pound and increasing export costs will be highly inflationary and that will trigger a debt trap. How are people to pay back their loans when they are already overextended and expected to consume the economy out of trouble this Christmas?

According to the ONS, UK households spent £900 more on average than their income in 2017. Two things stand out here. The first is that UK households haven’t been in deficit since the unsustainable credit boom of the 1980s that led to the early 1990s recession. Secondly, if household spending is in deficit and Government spending is also in deficit (in real terms) as a result of austerity cuts and now Brexit uncertainty is slowing investment in the private sector, what do you think is going to happen to the economy?

If all three drivers of growth are failing then so is the economy. But that’s okay – we can just bail everyone out again, right? Wrong. There are no reserves, and on top of the already slowing growth (UK economic growth is slowest in the developed world) the financial system has almost no built-in structural resilience and policymakers are oblivious. Depending on what side of the argument they are on they are either blinded by magical thinking or panic over Brexit.

Household spending represents 76% of the UK economy and last year UK households went £25 billion into deficit. In total UK households have approximately £250bn in unsecured credit (payday loans and credit cards). Even without Brexit, a personal debt credit crunch could bring down the whole economy on its own.

At least the banks have all now passed their much heralded annual stress tests by the Bank of England? That is true, but the stress tests giving people so much confidence are based on the banks having enough assets to cover their liabilities if they were to sell off all their assets in a crisis. This is great as long as only one bank is going down and all the other banks want to purchase their assets (loans such as mortgages and personal debt book). However, what if there were another system-wide crash and all the banks saw households falling behind on repayments towards their unsecured debt mountains and none of the other banks or big finance asset managers can buy the failing banks assets?

Don’t let me be a party pooper though, go ahead and buy all that stuff for Christmas. It’s your duty to keep the economy going. And forget all my past columns about killing the planet through overconsumption as well as the pollution from unregulated manufacturing in poor countries with low wages, child labour and no worker safety regulations that we need in order to keep prices low. That was just me being miserable. I mean your dog needs that Pawsecco (prosecco for dogs), men now need age defence serum with new macho brand names, and who doesn’t need a willy warmer or a back scratcher?

Every year we spend £1bn on perfume and as much as £400 million of that is panic buying by men who don’t know what to get their partner for Christmas or a birthday. Thoughtful, huh?

The trouble is, if we don’t consume this Christmas the economy sinks and if we do then the planet dies. Don’t worry, however – neither of these things will happen immediately. It will happen slowly at first and so we won’t react. Bet then it will become sudden and we won’t be able to react. On the upside, there is probably still time to turn it around and create a new economic system based on a new set of values and then we could save society and the planet. Search The National website for my past column “Elevating economics tells a better story than Brexit”. It’s not as hard as you might think.

For me, personally, I have a new rule for this Christmas. I am not buying nor do I want to receive anything from anyone that will not last at least 10 years or is not already 10 years old. Impossible? Not at all: a 10-year-old malt, a repair and refit for my 15-year-old Barbour waxed jacket or antique cufflinks – what might your list look like?  Whatever I buy this Christmas it will be more about family than gift-guilt, more about the planet than unnecessary consumption. Except for that Chocolate Orange I get every year – I need that!  When it comes, have Merry Earthmas everybody.

 

Independence Ambassadors

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