Brits 'most debt in Western Europe'

The point I am trying to make is that banks and financial institutions are just like any other commercial enterprise. All that matters is the bottomline. This is the world today and if banks have to survive, they have to keep up with the way market moves.

When debt can be a virtue

Leader
Sunday October 1, 2006
The Observer


The British are among the most personally indebted people in the world. In just 30 years, the proportion of debt to income has increased by four times. Even in a low-inflation, low-interest rate economy, there are ominous signs of distress. Personal bankruptcies are rising, as are house repossessions.

The numbers of indebted will be swollen further this week by the new crop of undergraduates at English universities. They are the first to pay the new annual fees, of up to £3,000, for attending university, introduced by the 2004 Higher Education Act. After borrowing for living costs, most will leave university with an average debt of around £20,000.

Nearly every British university has introduced fees but, unfairly for English students, the Scottish and Welsh assemblies have excused their undergraduates from the increase. The government must ensure that the Scots and Welsh pay for their own generosity rather than English taxpayers.

Meanwhile, some argue that a 12,000 fall-away in applicants for university places this year has happened because students from low-income families have been deterred from applying by the financial liabilities higher education entails. Fear of debt certainly accounts for an increase in numbers of students studying from home to save living costs.

That is a problem to be addressed through well-targeted support for the poorest students. But it is not a case against all fees. They are a vital source of income for British universities. In the international league tables, the British come second only to the Americans in the quality of our universities. Fees will sustain and strengthen our advantage.

Besides, the drop in applicants is exaggerated by comparison with last year's exceptional intake, swollen by those hoping to escape the new fees. It may not represent a new downward trend.

In any case, debt to finance university education is more worthwhile than the more widespread borrowing for lifestyle accoutrements - new cars and kitchens. This consumer debt is the real economic and social problem.

Most undergraduates will find their fees to be a worthwhile investment. What we must do, however, is to guarantee that the extra cash is ring-fenced for universities. The temptation is for the government to siphon off the new revenue stream for other purposes. There could be no greater betrayal - both of our young people and of our universities.