The Lost Generation

Evidence shows that in the record unemployment figures released just a week ago of approaching 2.5m and rising, that the young have been hardest hit by this recession as unemployment figures of those leaving school or University is rising faster than any other sector.

Many commentators believe this will lead to a 'Lost Generation'. As if we did not have enough problems with youth disaffection leading to what appears to be a sharp increase in crime, and violent crime at that, amongst the young, it now appear that prospects for their future are getting bleaker.

You might think that of the Government priorities that have to be juggled to be produce the kinds of savings required to decrease our budget deficits and massive borrowing requirement after the incredible sums spent on bank bailouts, it should not be the time to make life harder for young kids.

But in the world of number crunching and accounting, strategy goes out of the window. So this week we have seen two extraordinary announcements. First, Ed Balls, former Treasury Minister and now in charge of Education, has volunteered to slash £2.5bn off the budget for Education, then we get the Director General of the CBI, Richard Lambert, suggesting that students should pay increased tuition fees. In fact, it appears that the Lib Dems are going back on one of their most important Election pledges on tuition fees.

Perhaps it is because the Government now feel with record pass and top grade levels at GCSEs that the job is done - we no longer have to invest in the education of our children as they are born more intelligent in the UK, perhaps. What a banner that would read at the next Election for Labour, 'Brighter kids under Labour'.

The fact is that as we propose to de-invest in schools having invested instead in stock markets shares of companies like RBS, Lloyds, Northern Rock and Bradford & Bingley instead, the prospects for our young are diminishing. And even if they want to weather the storm and go to University to apparently increase their prospects for the future, they will leave University with a millstone of debt around their necks, the likes of which non generation has seen since the introduction of the Welfare State. Oh, and their job prospects will be the worst for generations with that level of qualification as the top companies decrease or even stop their graduate intake schemes - BT has led the way on this.

Only last night, there was a program on TV which showed that some 9 million people will reach retirement age with the prospect of a pittance of a pension as we are never encouraged at the right age to set aside enough money for our future. In fact, only 4% of the population will leave their jobs with the nirvana of two thirds of their final salary income and - you guessed it - the vast majority of those will be Public Sector workers on superannuated fantastic pension schemes. My argument here is that as a nation we should be setting out from the earliest age the conditioning and discipline of saving for retirement as the young enter the job market, instead we have our brightest talent weighed down by debt. And there is to be more of it.

There will be a point when going to University will be the domain of foreign students and rich kids - how un-Labour will that be? Already back in the 80's when I was at University and Polytechnic, there was as many as 25% of my colleges' students from overseas and one class shared students from Iran and Iraq whose countries were at each others' throats. The campus was regularly picketed by students of both sides raising funds for weapons back home and at the Poly of Wales I entered the Junior Common Room where they were lobbying for a quorum on a vote to send aid to the South Moluccan terrorists.

Recession leads to all sorts of daft things but what is most stupid is that the priorities of yesterday become far less important when people start studying the bottom line. Yet, if you looked in the Appointments Section of this week's Sunday Times, you will not see a single Private Sector job advertised - just about everyone was advertising fat salaried positions at the head of some Quango, NHS Trust, Government Think Tank or other Government Department.

I can't say that the Tories are right about their cuts but starting at the top is a great idea in my book. Less layers of bureaucracy will bring into sharp focus who we want to keep in high Government positions and who we don't - plus what flunkies and mandarins are also due for the scrap heap. Personally, long before I got the knife out on education, I would sit down and look at the money being wasted in these administrative departments that have grown up in the last 12 years like The Department of the Deputy Prime Minister or the Department of The Business Secretary - things that did not exist until this Government arrived. As much as a few countrymen of mine might think a devolved Wales is a good thing, frankly we cannot afford the salaries, expense accounts and opulent new buildings of the Welsh Assembly when so few people were actually interested enough to vote for it. It is a layer of Government that is entirely superfluous.

It may not be the time to start thinking about what is important to Britain so far ahead of an election but if we do not do it, the idiot politicians who led us to financial ruin will get their knives out instead. At a time when prospects for young people have been at their worst for years, the last thing we need to do is to take money out of the system and make them pay more for their higher education. It's a double whammy that lays the seeds for another dirth of talent in Britain at a time when we need the best to come through an innovate to make us competitive again.

But, as with so much of the policy of the top echelon of people, the focus of this future is the same as the last 12 years - Britain's only real growth industry was finance and once again we see the emphasis has been to save the careers of people who nearly ruined us. For them, we could not have bunged more money down a drain without any questions as to how much was needed and why and what modifications to behaviour we would mandate. Everyone is afraid of these rich goons who think that raising £9bn of someone else's money with only a tiny amount of their own risked to buy a drugs store chain is great business acumen. It does nothing for the wealth of this nation. Having knights who take £1bn in single dividends and not pay a bean in tax and revering them as business gurus is just sick while kids cannot get a job or a decent education.

The strange fact is that I am not a Socialist and am all for free enterprise but I am not for thin wedges of society using our tax money as their bank and I am not for Governments allowing super rich people and companies to avoid paying their way in tax.

There are a ton of ways that £2.5bn could be saved or raised long before we get anywhere near the Education budget or adding on extra debt for graduating students. The lack of thought put into is pathetic - then again, Ed Balls was a finance man and he has had his education all done and paid for. So no surprises what he really thinks about the kids of today.

In the coming months, we are going to get a lot of stupid decisions made which will wipe years off our progress. In the meantime, the bankers we saved will be taking us enthusiastically forward to the next crisis thanks to our money and lack of constraints. Now is the time to enter the debate on what is important to us all - after all, it's our money they are using.

Scam After Scam

The reason we put up with it is because we have no say in how our own money is spent.

What the hell am I referring too? Of course, it is our 'investments' in UK banks amongst other things - the sort of investment that needs to be managed by some cerebral high-brow who can watch when the cursor gets above the value 'bought' and press the button to 'sell'. For that, one of the top headhunters have snaffled a former RBS banker to lead the intrepid search for the person who has the right sized digit so that they don't press 'buy' - the same headhunters who the TCCB paid a fortune for in order to select the acting coach of England's cricket team to be the coach - the one and only Odgers. Money well spent, indeed.

Well, you may be happy to know that as the banks gear themselves up to do ever more risky deals with our cheap money and then pay themselves massive bonuses like the one I reported on at Barclays on Friday, the scam works equally well with our money at the opposite end.

Let me explain. You see we bailed out the likes of Lloyds and RBS, the former having bought HBOS, has 28% of the UK mortage market. Now we injected some £70bn into them in new capital, guaranteed a load of debt, ring-fenced a load of toxic debt, gave them loans at virtually no cost and walloped a load of Quantitative Easing money down their gullets too. You might possibly think that might be good for us. Well, if you want a mortgage, it isn't.

Last week, the Bank of England voted to keep interest rates at an historic low of 0.5% for the fifth consecutive month. The cheapest mortgage you can get today, even with 40% deposit is 4.95% - that's nearly 10 times the base interest rate. If you wanted a five year deal with RBS or Lloyds, then you are looking at shelling out on their new, 'highly competitive' deals of 7.49% at Lloyds or 7.25% at RBS - some 15 times the base rate. The shrewd people amongst us would note that the current superb mortgage rates are now higher than prior to the credit crunch. The best rate you will get on a 10% deposit mortgage in the UK is 6.19%, a whopping 12 times the base rate.

There aren't many industries where you can charge such rates. And this is at the time when the public owns a share in at least 5 High Street banks, two of which who offer mortgages we own outright (the Rock and Bradford & Bingley). For all the blustering and piffle from Cabinet Ministers and Gordon Brown himself, we are being racketeered by the very companies we so very generously were proxied to bail out.

If you sat down and tried to try to write the worst case scenario for a financial mess, you could never have got to within a million light years of the khazi we are in. You could also never dream of writing some of the guff we are told about how well off Britain is in this scenario by the idiots who run this country.

As taxpayers were are being royally shafted at all ends - and the shafting has only started as the cuts in public services and the higher levels of tax to pay for our own largess has not yet kicked in.

You couldn't dream it up - we bailed out our banks so that they could absolutely shaft us to make massive profits on their lending while they continue to take mega-high risks to pay themselves huge bonuses. And it's our own money they are using.

I've said it before and I'll say it again - we must be stark raving bonkers.

Where Has All Our Money Gone?

Wandering through St Albans market yesterday on a lovely September afternoon, I couldn't help noticing that the stalls, the shops and the restaurants seemed far busier than they have been for a while. Now that Lord Mandelson has decreed it, are we really out of recession?

There does seem to be some encouraging signs and we should be thankful that we may be through the worst of things even if 'The Dark Lord' and other like Stephen Hester of RBS warn that we should not assume that everything will be rosy from now on. Even so, perhaps there are signs that we are getting a little more confident and spending more.

Perhaps different to the last recessions when there were similar effects on jobs and industry, this time around we are left with an incredibly large bill as a long term legacy of the crisis we have been through. Some stark facts reveal the cost of the credit crunch and recession combined has been around £1.5 trillion which was the total amount we spent, collectively, on bailing out our financial system.

We recapitalised and provided loans to the banks to the tune of £289bn which included the nationalisation of Bradford & Bingley and Northern Rock as well as our shareholdings in RBS and Lloyds Banking Group - we are still around £10bn to £20bn down on this but the shares in RBS and Lloyds have recovered significantly and we may get our money back soon on those particular deals although the other two may take a good deal longer. We gave a further £200bn in general liquidity support to banks - which prevented those we rescued and others vital support to stop them going bust.

We spent a further £400bn in purchasing and lending money to buy assets. It is unclear how much of that money can be recovered. Then, of course, we have guaranteed a further £650bn to banks to cover their losses. In theory, we should get a good proportion of that money back providing banks remain solvent and there are no disasters ahead. Alan Greenspan, former head of the Fed in the US, recently said we would get another crisis at some point so we should still be wary that all this money is certainly at risk. It does make you wonder why we continue to condone and aid the machinations of the financial system when we know it has such inherent risk if it is not properly reformed and regulated as the last thing we need is for the whole thing to happen again - then the money would have truly been lost and we would require a great deal more to perform another economic resuscitation.

The £289bn of loans to risky banks is equivalent to £11,500 of liability for every household in Great Britain.

That's an awful lot of money for a society that already has around £1 trillion of unsecured debt, masses of mortgages, diminishing household income and more uncertainty on jobs. I certainly don't have the money lying around if it was required.

National Debt was around £466bn in 2007, £526bn in 2008 and we thought it was really bad when it would rise to £609bn in 2009. But by 2014, debt is forecast by the Treasury to rise to £1.37 trillion - and remember, we have revised these predictions every month so far as lower tax returns and higher benefits pay outs due to greater unemployment has affected the wishful thinking calculations to date.

In 2014, we will pay £60bn in interest on that borrowing alone.

£60bn in the context of the total bail outs does not seem much. But to put into proper perspective, that's equal to the entire Education budget for the year or just over half the budget for the NHS. It is that huge and it is why the world's formative credit agencies are beginning to believe that Britain's ability to service and repay the mounting debt will get progressively harder. As we borrow more and more, confidence will get lower and lower as there is only so much that everyone of us can afford to keep up with the repayments, particularly as we are all affected by the fall in the housing market and the uncertainty in the job market.

For us as individuals, our household net income has dropped over the last 10 years. We supplemented our earnings by a rich source of money - the rising equity in our homes. Sadly, in this crisis as much as 15% has been wiped off the value of our homes which is equivalent to around £422bn.

It means that we are collectively worth around 10% less in terms of our personal wealth or around £393bn has been wiped off our collective value. Finally, between 2007 and 2008, around £815bn has been wiped off our value in total.

That is equivalent to about £31,000 less wealth per household in Britain in just two years. Given that we are liable for £11,500 per household too, our actual drop in wealth is closer to £42,500 per household.

I don't suppose those milling around the market had actually thought that through as they started spending again as if there was no tomorrow.