Nathan Mladin introduces Theos’ latest report, ‘Forgive us Our Debts’ and explains why we need to start a better conversation about debt. 28/01/2019
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If you’ve been following the news, and aren’t among those who immediately skip over the economics section, you’ll know that we have bucket loads of debt in our economy. This is in the form of personal or household debt, corporate or business debt, and public or national debt.
Personal and national debt are now at circa 90 per cent of the Gross Domestic Product (GDP). Unsecured household debt – that is, debt that is not backed up by collateral – is at an all–time high.
More than 16 million working–age adults in the UK have less than £100 in savings. Many low–income families are forced to borrow, often taking out loans with crushingly high interest rates, just to make ends meet. Sustained wage stagnation and a steep rise in the cost of living are two of the main drivers of problem debt today.
Debt is clearly a huge, and hugely complicated, issue. The term covers a multitude of sins (read ‘contracts’ between different kinds of lenders and borrowers). But debt is also never merely an economic issue. It is also a deeply moral and social one. It depends on moral judgements about what is fair, right, and beneficial to individuals and the wider society.
As a form of social interaction, all debt should be assessed not only in terms of its ability to boost productivity, which it can and often does, but also in terms of the relationships it establishes or affects, for better or worse. These moral and relational dimensions of debt are rarely fully understood today, let alone taken into account in our public conversations, save for a few notable exceptions such as payday loans. Our latest report, “Forgive Us Our Debts”: lending and borrowing as if relationships matter, seeks to begin to remedy this.
The report is the culmination of a year–long research project by Theos in partnership with St Paul’s Institute. Taking a holistic approach, it explains and reviews the latest developments around the three main types of debt in our economy. Drawing on Christian ethical teaching on lending and borrowing, interest and usury, “Forgive Us Our Debts” offers a series of ethical principles as a framework for reimagining debt relations – to make them fairer, more inclusive, and more clearly aligned with the common good.
But ideas and theologically–derived ethical principles alone are not enough. That is why the report ends with a series of recommendations. Some are concrete and policy–focused. For example, we call for corporate debt to be put on an equal tax footing with equity, so that debt is no longer tax deductible. As a connected measure, we ask that corporate dividends should not be taxed. This is to redress the imbalance that currently massively favours debt. We also call for more and better regulation to continue counterbalancing the disproportionate power lenders have over individual borrowers. New ways of ensuring risk is equitably shared should be devised. We also suggest restrictions on consumer credit advertising should be put in place, similarly to tobacco and alcohol advertising. The health of our society is at stake!
There are other recommendations in the report which point to broader cultural changes, which policy and regulation alone cannot achieve. We call for greater investment and civic participation in ‘social lending’ practices and institutions. We note that, if we are to see fairer debt relations, lenders must understand and take into account the borrower’s personal circumstances – not just their credit score. Borrowers, similarly, must be able to understand the terms of their debts. This presupposes necessary information is made available and accessibly presented to all parties. We also point to the need for more opportunities for public consultation on government debt. (A full list of recommendations can be found on pp. 95–106 of the report.)
Not everyone will agree with our recommendations, and that is absolutely fine. But as Lord Brian Griffiths notes in his commendation, because of this, “Forgive Us Our Debts” is – we hope – an invitation to join a better and much needed conversation about debt – one that takes debt’s moral and relational aspects seriously.
You can download the full report here, a brief summary here, or if short for time – watch this 2–minute video below.
You can listen to a podcast recording of Nathan Mladin talking about the ‘Forgive us our debts’ report at an event hosted by the LSE in December 2018, ‘Debt in the UK: Faith–Based and Secular Responses’.
