Jeff Salway: Cameron’s call to repay debts shows how little he understands pressures on families

FACED with a stumbling Labour government led by an unelectable prime minister, the general election last year was David Cameron’s to lose.Yet despite public disenchantment with the Labour government, Cameron fell short of the majority he needed. It was partly because he was seen as one of the elite and out of touch.

And for all his efforts to shed his Bullingdon Club past and paint a picture of a father faced with the same day-to-day issues as anyone else, Cameron still has an image problem. One of his big mistakes has been to continue insisting that “we’re all in it together”. No-one likes being told that by a Cabinet of Old Etonian millionaires leading a party bankrolled by the City.

That’s what’s astonishing about Cameron’s call during his original party conference speech last week for households to concentrate on paying down their debts.

To recap, the speech at first included a line insisting that getting out of a debt crisis “means households – all of us – paying off the credit card and store card bills”. It was amended to say that all of us actually are paying off those debts, but only after it led Wednesday’s front pages.

Clearly Cameron’s advisers realised late in the day how insensitive it would appear to have a multi-millionaire exhorting the public to take responsibility for their finances. They should also have removed the inference that he is among those having to repay credit and store card debts, which is facetious at best.

Does he have any grasp at all of the pressures that so many households are now under? Does he not think the message that paying down debts is essential in this environment has already hit home? A glance at the last year of Bank of England monthly reports showing how much people are taking out on cards each month and how much they are paying down underlines that the appetite for credit has diminished hugely.

Not only are lenders restricting decent credit card deals to those with the cleanest credit records, but faced with low wage inflation, rising unemployment and soaring household bills most people realise that unless they get their debts under control they are financially vulnerable.

The latest Legal & General MoneyMood survey found that around a million more households in the UK are worse off now than a year ago, with more having to use their savings to meet mortgage payments and pay higher food and fuel bills.

Does Cameron, worth an estimated £10 million, pay energy bills, fill up his own vehicle or do his own food shopping? If he did, he’d know that household costs are rising rapidly, with energy bills pushing more people into fuel poverty every month.

Cameron points to low interest rates that are keeping mortgage costs down. But while it’s true that the next increase in the base rate could prove catastrophic for many families, low interest rates have hurt more people than they have helped.

Savers who since March 2009 have watched the value of their savings waste away have been given no help by Cameron’s government. Meanwhile, rents are going up as opportunistic landlords take advantage of limited supply to boost profits, even while their own costs remain low.

If he’s so concerned about personal debt, maybe he should boost funding for the likes of Citizens Advice, which is losing valuable funding and being forced to close branches south of the Border. If he’s so concerned about personal debt, why does he allow universities to charge fees that will condemn millions of students to years of debt, during which they have no hope of making savings or kick-starting their pensions. And if he’s so concerned about personal debt, maybe he should put more pressure on the energy suppliers hiking their prices while simultaneously posting massive profits.

Then there’s the basic economics of it, which means the Treasury – not to mention retailers – would have been gobsmacked by Cameron’s comments. In short, if everyone used all their earnings to clear their debts or to save, demand for goods and services would fall, businesses would fail and the economy would suffer. Cameron urged everyone to slash their debts, from government to businesses and individuals, but that’s not possible. You can’t have it both ways.

Yes, personal debt levels are far too high, thanks largely to a credit-fuelled spending binge in the Nineties and early Noughties. But when household finances are being squeezed and the government is doing very little to help, a sermon from the Prime Minister about repaying debts is patronising and insulting.

Pensioners pay for QE

IT WAS revealed last week that growth in the last quarter was lower than expected. Funny how, without a strategy for growth, there is no growth. So the latest round of quantitative easing, injecting £75 billion of new cash into the economy, was inevitable.

It will have an impact on many of us, not least pensioners and particularly people on the verge of retirement. Gilt yields plunged during the last period of QE (described by George Osborne back then as the “last resort of a desperate government”) and they are likely to do so again. And with gilt yields underpinning annuity prices, the income paid by annuities, already at a record low, is set to fall further.

Delaying annuity purchase may not be the answer, as the long-term projection is downwards, so consider buying it in phases. More importantly, shop around for the best deal and make a fuss if you’re a smoker or in ill health, as this could mean you’re eligible for a more generous enhanced annuity.