Wednesday, 30 May 2007

The Debt Disaster

It is my opinion that the UK is in the throes of a social disaster brought about by personal debt.

It is also my opinion that the Bible's prohibition of lending money at interest arises not out of obscurantism, nor out of a failure to understand economics, nor indeed out of a mere desire to protect people from 'excessive' (as distinct from 'moderate') interest payments, but out of a need to protect the poor and to prevent increasing poverty.

Just as the Old Testament allowed for divorce and the keeping of slaves, so it also allowed the Jews to lend to Gentile nations. Nevertheless, the prohibition of usury, meaning the charging of any interest on a loan, was established as the way to treat one's brother or neighbour. It is thus the Old Testament equivalent of the command to 'turn the other cheek' - not always easy to do, but representing the most desirable 'economic value'.

Up until the Middle Ages, the church also held that usury was a sin because it was immoral. Even after this view was overturned, personal debt was regarded as a last resort, to be avoided at all costs. Only in the latter part of the twentieth century did it become a widespread practice for people to buy and borrow 'on credit'.

In the 1950s, 'hire purchase' began to become common - buying goods on the 'never never', a system of which it was said, "Buy something on the never-never and you end up paying twice as much." Later came the personal credit card which, as one campaign put it, "Takes the waiting out of wanting."

Today, most British people are in substantial debt. The average adul t in the UK owes £28,024 (source, Credit Action). In 2006, the median (commonest) UK annual income was £23,244 gross (source, National Statistics online). On average, each of us owes more than we earn in a year.

Paying off a year's salary, after tax and outgoings, would be hard enough. But on top of that debt is the interest - the 'never never' element. At the current 5.5%, the interest alone on that debt is £1,278. But many lenders charge a much higher rate, for example on credit and store cards. The result is that a substantial amount of what people pay goes merely to service the debt, not to pay off the loan, with the result that yet more interest accrues to the lender.

If Third World debt is such a serious problem to entire countries, one is left wondering why Old and New World debt is not a similar problem for individuals. And if Third World debt has unfairly channelled money to lending countries, could it not be that individual debt in the Old and New Worlds is equally unfairly channelling money away from those doing the work to those doing the lending, at no great effort on their part?

Jesus said to the third man in the 'Parable of the Talents', "So you knew that I harvest where I have not sown and gather where I have not scattered seed? Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest."

If that is what he thought of those who lend on credit, what should be our own view? Future posts on this blog will highlight news items concerned with the debt disaster. Comments are welcome.

Revd John P Richardson
30 May 2007


  1. A lot of debt is tied into property. It was shocking that prior to leaving my job I was earning over £30k and could not afford to get onto the house ladder where I lived. You would think that the market could only sustain so much before it collapsed but it hasn't. Part of the reason is that houses are an alternative investment in the absence of secure pension funds. We have created a debt economy that encourages people to borrow and then hurts them later for the god of economic growth

  2. Yes, I completely agree with you. In the time since I graduated in 1994, the whole debt culture has ballooned starting with students borrowing thousands on loans (they were just coming in as I left, and I borrowed just 700 pounds). Also, the whole idea that you have to work hard to earn has been replaced by gambling, starting with the National Lottery in about 1995. I'm dead against the government allowing any more gambling, and yet it appears to be becoming more acceptable in society.

    I do wonder if they teach any kind of financial education in schools, such as what an interest rate is, and the folly of borrowing money to buy things that depreciate in value. Mortgage debt is the only sort of debt I would put myself into, simply because there is an asset which backs it which you can always sell to pay off the debt.

    But there are awful stories that you read in the press, of suicides because people have debts they cannot pay, and you wonder how they ended up in that situation. What were they spending the money on? The whole idea of bankruptcy is to free people from these debts, to wipe them out, just like our redemption as Christians, rather than being forever indebted to interest payments.

    Like you, I fear for our society and the effects of these changes. And I suspect much of it is driven because of a lack of contentment. Paul's words to Timothy seem very appropriate:

    But godliness with contentment is great gain. For we brought nothing into the world, and we can take nothing out of it. But if we have food and clothing, we will be content with that. People who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge men into ruin and destruction. For the love of money is a root of all kinds of evil.

  3. John - OT here but I wonder if you can help.
    Pete Broadbent has claimed that inerrancy was never a part of Britsh Anglican evangelicalsim but (like all evils) is a fairly recent American import.
    I doubt whether Broadbent's historical claim is true but don't have the requisite works by Packer etc to answer this. Didn't some Victorian Anglicans hold to inerrancy? Pusey? What about Liddon? Thanks for any pointers here.