Will debt undo us?

published in the Church Times (3 October, 2003)

The wages of borrowing is human misery. Antonia Swinson, a financial journalist for many years, says we shouldn't call it credit — what we are talking about is usury.

DEBT is everywhere. Each month the figures become mote dizzying: "House loans boom takes personal debt to £888 billion" screamed the headline in the Daily Mail in the first week of September, while the Wall Street Journal agonised as America's "consumer-debt bomb reached $8.7 trillion [that's $87,000 billion]". Such debt is surely unsustainable. What will happen? How will people survive when the credit crunch bites?

Whenever there is a disconnection between our financial life and our spiritual values, ordinary people are used and abused, and others — almost always that unholy alliance of financial services and landed interest — get rich at our expense.

Connecting God and money is not for the faint-hearted Christian. We have been brainwashed by that "render unto Caesar" line, programmed into thinking that it is somehow not possible to discuss our financial lives in godly terms. Yet I am certain that money, the stuff we think about dozens of times a day, is on the front line in our battle to find an honest relationship with God. So let us start by looking at who benefits from this debt moun-tain, and at what the Church can do about it.

The democratisation of debt in the late 1990s was engineered by respected, knighted bankers and politicians who, through deregulation, low interest rates and lax lending-practices, created a giant credit bubble that has enslaved the many and enriched the few. Only as far back as the 1980s, people were supplicants in a queue for mortgages, and con-sidered chequebooks rather racy, never mind credit cards.

But as debt has been transformed into the lifestyle choice for successful professionals (that is, anyone with a bank account), temptation is now the norm. We are not, however, being empowered — just sold a line. What price progress, when debt helplines are swamped with desperate callers, and repossessions soar?

More than six million households now have difficulty juggling monthly bills. Nine million Britons are "financial phobes", too frightened to open bank statements or attend; to their finances. The human cost of debt — pain, lost hope, misery, broken relationships — is unimaginable. And this is in the respectable, credit worthy slice of the market.

Down at the "sub prime lending" end of the scale, where lurk the loan sharks and doorstep lenders, is human misery mat can blight generations. At present, according to New Economic Foundation's latest debt report, 1.5 million people have people knocking on their door for cash payments each week. And it is big business — loan companies exact payment of loans at 1000-2000 per cent interest; average borrowings are £940; the sector is worth £3.3 billion.

Britain is well-known among predatory lenders as baying a laissez-faire approach to predatory lending, which says much about the low priority that poor people have in Government. Why should it be easier to set up as a moneylender in the UK man as a credit union, which could effectively drive out money-lenders that asset-strip whole neigh-bourhoods? Only now is the Government introducing a White Paper to discuss credit-lending practices.

It's time to label things properly. We should talk not of "credit" but of "usury". Debt needs to regain its old stigma. How about this for a 21st-century platinum-card advertisement: "Will you pay with a Usury Card, sir? That'll do nicely." That might make us think twice.

In The Divine Comedy, Dante puts usurers (or moneylenders) in the seventh circle of the Inferno, sitting on burning sands with cash-boxes around their necks.

Our ancestors, living through wars, famines, and hardship, would have seen debt very differently from us. As viewed through a Judaeo-Christian prism, debt equaled slavery. It was a message rammed home, week after week, from the pulpit. In Genesis, the bankrupt Egyptians plead with Pharaoh's chief accountant, who predicted the boom and the bust: "Our money is all spent ... there is nothing left ... Buy us and our land for food, and we with our land will be slaves to Pharaoh." How low can you go?

That attitude to debt has disappeared, in our secular age. Yet we are no less vulnerable: It takes only a big piece of spending, or a sudden change of circumstances, to tip us into unsustainable debt.

Keith Tondeur runs the charity Credit Action, a Christian, debt help-line that, witti associated organisations, counsels 150,000 people a year. When I Speak to) him on th& telephone, he has just been advising a vicar who has unsecured debts of more than £110,000. It's a depressingly common experience, apparently he has several new cases every week of six-figure debt burdens.

"Usually people take on the debt they feel-they can repay, but it only takes illness, unemployment, an in-terest rise .or a property slump, and suddenly it is unsustainable. If you borrow £30K or £40K, you are paying £250-£500 a month. This soon, rolls up, and becomes £60K-£70K. The interest is now £500-£1000 a month. At this point the only solution is for a relative to step forward to pay up a proportion and ask for the rest to be written off — or bankruptcy."

Down at the harsh end of the debt culture, Church Action On Poverty has been doing sterling work for years, banging government and policy advisers' heads together, not least with their innovative "Debt on the Doorstep" campaign (News, 6 December). It seems extraordinary to me, a lay person, that their work appears to be considered by Chris-tians in the UK as just another good cause among many, when their cam-paign should lie at the heart of every congregation and church office.

As the fin-de-siecle bull-market boomed, we. all used debt to buy lifestyle and shares, believing that the markets would rise ever upwards and float us out of the need to live within our means. Houses turned into piggy-banks, whose value could be raided; we thought market economics would supply our lifestyle, and the basic laws of money management no longer applied to us.

And who has profited from our ballooning indebtedness? First, it is convenient for the state: it keeps us quiet, in the 21st-century equivalent of domestic service. Students will hardly riot when they have a £20,000 debt on their backs. The rest of us, who stay sane only by contemplating the equity in our houses, generously keep the economy rolling along, paying debt out of highly taxed income.

Employers benefit from our debt, too: we are unlikely to rock the boat when we have mortgages to pay. Reading articles in the human-resources press, I often wonder whether our culture of office bullying is debt-driven: the bullied, who have bills due at the end of the month, are not free to walk out.

Then there is the huge and competitive financial-services industry, making us all manner of secured and unsecured loans. And, finally, the landowners in the UK, who have grown effortlessly rich with the explosion in asset values. The £680-billion mortgage-debt mountain in the UK is owing to a property mar-ket that is based on an artificially tight land supply: 99.9 per cent of us are squashed on to less than 7.5 per cent of the UK land mass (see Kevin Cahill's Who Owns Britain, published by Canongate).

While we service our mortgages — a feudal term that, literally, means a bond until death — 189,000 people, roughly the population of Luton, continue to get rich by owning two-thirds of all UK land. Over the past 20 years, as ordinary people I have been ground Between the millstones of an increasingly American-style market economy and the enduring feudal patterns of land ownership, the result has been not just the biggest personal-debt mountain in Europe, but the worst work-life balance in Europe, too.

Today, in my view, the Churches can make several moves on this issue. They can contribute to the Government's forthcoming White Paper on creditlending practices. They should be lobbying for a legal interest-rate ceiling, as exists in Germany, and for the abolition of domestic bailiffs. They should invest heavily in services offering debt-counselling, financial education and budgeting advice.

As for land, I believe that the time has come for Christians to engage in popular debate on fiscal reform, campaigning, as our 19th-century and early-20th-century forebears did, to replace existing property taxes with a tax on the rental value of land, and for bet-ter infrastructure and public services.

Finally, in every area there should be high-profile, cleverly marketed church credit unions, just as there are church schools. Churches could co-operate across denominations, marketing Jesus's radical message of stewardship with as much energy and pizzaz as the loan-sharks. A pioneering example is the Waltham Forest Community Credit Union which plans to open its doors in November this year, having attracted support from 120 faith groups, including the Catholic Church, Church of England, local synagogues and mosques. Of course it will always be harder to set up a credit union than a non legit money lender, but the good news which needs to be shouted from the rooftops is that to borrow £1000 you only pay back £1,065 — the legal maximum is just 1% over a reducing balance at just 12.68%. Beat that Mr Moneylender. And of course there is all the incentive to start saving too, investing in your own community. In other words, showing good faith. There is already £262 million in the pot so, what are we waiting for? For there is no time to lose. I don’t want to sound over-dramatic, but I do believe that there is a reckoning for all.

Some things are not susceptible to seasonal change. High-street chains are currently filling their stores with attractive consumables in their annual attempt to turn Advent into a time of fevered shopping. Official figures released on Monday show, however, that high spending is now an all-year-round activity. The British added a further £1.6 billion to their personal-debt burden in the month of August, 13.5 per cent more than the same month last year. If mortgages are added to this sum, the total personal debt stood at £9.3 billion. Each household is calculated to owe 123 per cent of its income.

The UK is not alone. In the United States, in the year leading up to June, a record 1.6 million people filed for bankruptcy. In Thailand, a survey suggested that those earning between 20,000 and 30,000 Baht (£300-£450) a year owed an average of 710,800 Baht (£10,800). The Churches are used to campaigning on behalf of debt-ridden countries; the debt problem, however, strikes nearer to home, and takes no account of the general prosperity of the country. One cause of anxiety is that debt is still not seen as a problem — note the use by economists of the phrase "the strength of borrowing"; periods of high borrowing are spoken of in terms of "consumer confidence". Developed economies depend on high consumer spending, and interest rates are adjusted, albeit cautiously, in order to encourage this. The financial industry gets alarmed only when a significant number of people default on their repayment, i.e. drop out of the borrowing loop — and sometimes not even then; the chairman of the US federal reserve, Alan Greenspan, said last week that many consumers were "experiencing significant financial distress"; nevertheless, he said, "overall, the level of debt is being serviced adequately."

Many of the people about whom Antonia Swinson writes this week (page 15) would add little to these global figures. They borrow relatively small sums, since mortgages are seldom involved. Yet the "significant distress" that she catalogues is profoundly troubling. Debt is the Church's business, on pastoral grounds alone. There is also much more theological work to be done in a society in which debt and investment are interwoven, and the state borrows from its citizens in the form of National Insurance. It is unacceptable that so many on low incomes should need to borrow in order to achieve a basic standard of living, while others not very much higher up the socio-economic ladder are being lured by the inflated cost of housing to take ever greater risks by borrowing sums far in excess of their income. When almost all are living on the never-never, a prophetic Church will focus on the victims of reality.

Useful links: Website of the British Association of Credit Unions. They offer information packs and can put churches in touch with study groups in their area. Others: UK Government Info, World Council of Credit Unions, The Regulator of Credit Unions, Campaign for Fair Finance in the UK.