“You’ve never had it so good?” True for a few

10 months ago admin 0

Last week Lord Young was fired as David Cameron’s enterprise advisor for saying ‘you’ve never had it so good’. Yet to an extent he was right, but with caveats larger than a blue whale on bodybuilding supplements…

His comment (and I’ve only read the headlines) does seem to have been said in a rather insensitive way, after all, with benefits being cut and 500,000 public sector redundancies on the cards, for many it’s ‘never been so bad’. Yet it certainly isn’t wrong for everyone.

His assessment is in part similar to the not everyone is in the mire blog I wrote back in April 2009, so I wanted to speedily bash out some notes on the wider cause of this disparity, between what’s actually happening and perhaps what is acceptable to say.

There is no typical person

I suspect the background stems from trying to correct the slightly false impression of ‘blanket awfulness’ that pervades. I can think of two main reasons for this perception:

  • A desire for generic headlines. Too many  want to depict things as far worse for everyone than they’ve EVER been. This simply isn’t true, as economic downturns go, this one hasn’t been so harsh.Only last week a journalist was interviewing me about Christmas, and I could hear the questions stearing me towards saying something like: “Due to the terrible economy, this will be one of the UK’s worst Christmases in living memory.”

Yet that’s just not true, so I knocked it on the head, with a comment that I’m sure won’t make the page, as it’s deliberately tautologous: “For those in financial difficulties for the first time this year, it will be a horrendous Christmas, for those whose finances have improved, it will probably be one of the best for a while.”

  • Those in pain make the loudest noise. Quite naturally people who are stuggling are more vocal than those who go through their everyday lives without much change, or even with their situation mildly improving.This is something I’ve seen myself, with people complaining when I’ve done savings makeovers on TV. Comments fly out such as “what world are you living in, no one has any savings?” Whereas actually, there are far more savings than debt accounts in the UK. Something similar happened with my ‘cheap holidays’ work this year, with some people telling me “who’s got the money to go on holiday? No one does, so why are you helping those people?”

    Yet it doesn’t work the other way round, no one emails after I’ve done one of the many programmes focused on helping those in debt, saying: “why are you doing something with those in debt, there are more of us savers, ignore them” (though I do remember emails saying “they’ve only £20,000 on cards” that’s nothing why don’t you help someone in real debt).

    Of course it’s important to help those in the most trouble, but it’s never going to be the sole focus, it simply wouldn’t reflect wider society as there are…

…winners and losers

The economy isn’t in a good shape: a huge deficit, inflation, house price decline, poor savings rates and instability seem like a horror story. Yet phrased the other way: low interest rates, cheap tracker mortgages, the stockmarket’s bounced back and higher consumer confidence and things don’t seem so bad.

The way the economy looks depends on who you are and how you look at things, take these stark scenarios.:

  • Tracker mortgage, stable job. Someone on a big long term tracker mortgage paying just 2% interest and with a stable job is probably far better off than pre-recession, with the massive cut in mortgage costs more than offsetting other inflation. They may be impacted by localised house price decline which could affect this, but if they bought their house more than five years ago, they’re still probably seriously on the up.
  • Redundant with debts. If you’ve lost your job, have a pool of credit cards and loan debts, then of course you’re likely to be hurting far more than before. While UK base rate cuts have had a positive impact on mortgage holders, the credit squeeze has had the opposite effect on card and loan rates, they’ve gone up. Anyone with secured loans will have seen their costs rise radically. So someone in this position could be facing truly dire times.
  • Benefit recipients: compared to the future, it’s not been so bad. Technically we’re now out of recession (see my if the economy is growing why does it feel so bad? blog), yet perversely, for the long term unemployed on incapacity benefits, they may look back on the recession with rose tinted specs. Though please don’t confuse that with me saying it was a good time, it’s all relative.While the economy is now growing, albeit slowly, policy changes will mean less money for most on benefits. The cuts in housing benefit, incapacity benefit and tightening of the others is likely to mean those who have to claim get less now than they will have done in the past.
  • Retired couple living off savings. These are the other hidden big losers. Someone living off £250,000 savings could have seen the income this generates drop from £12,500 a year to less than £5,000 a year, which will have a huge impact on their standard of living. Of course it’s not as nasty as some of the above scenarios, but for those looking to their future with no more ways of generating cash, these numbers are truly scary.

The interactions between the various finances, the in tax rates, annuity rates, commodity cost changes and more, mean every single situation is different – the difficulty is remembering that.