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Money Week, Sep 01, 2008.
Things must be getting bad. Politicians are resorting to telling the truth.
Chancellor Alistair Darling caused something of a stir at the weekend by admitting that economic conditions are "arguably the worst they've been in 60 years." The financial crisis will be "more profound and long-lasting than people thought," he said in an interview with The Guardian.
Of course, Mr Darling does have to make the rather embarrassing admission that his earlier forecast for 2-2.5% economic growth this year, was so off-the-scale wrong as to be in the realms of surreal fantasy. So it's best if he tries to look as if he knows what he's talking about now.
And it's hardly breaking news. House prices have already fallen faster and harder than at any time since records began. Anyone who's still trying to compare this favourably to the 1990s recession is way behind the times.
But credit where credit's due. Mr Darling may finally be facing up to reality. Shame his colleagues aren't quite there yet…
Darling is finally facing up to the harsh reality
I'm no great fan of Alistair Darling, but I have to say he came across well in his "controversial" Guardian interview at the weekend. Granted, the paper was never going to give him a hard time. But to hear a member of the Cabinet dispense with the Orwellian New Labour-speak and just admit things were awful was refreshing.
That said, I'm not daft. I suspect Mr Darling's attempts to tell it "straight" and play up the image of the hard-working but slightly naïve politician, who doesn't quite understand the world of spin, is all part of some devious Gordon Brown election strategy. You know the kind of thing I mean. "Who do you want running the country? I, prudent Gordon Brown, with my straight-talking down-to-earth team, who tell it like it is? Or smarmy professional politicians like Miliband and Cameron?" Call me cynical, but you don't survive in the Cabinet as long as Mr Darling has without knowing how to play the game.
But still, compare Mr Darling's blunt appraisal of the British economy with the defensive gibberish spouted by Hazel Blears, the communities secretary. Ms Blears told The Times that "we know things are tough and understand that people are worried. But Britain's economy is fundamentally strong."
This is just patronising rubbish, and voters are rightly irritated by it. She may not realise it, but she's effectively saying: "you're all panicking over nothing. The economy's basically fine and you're just stupid people who are taken in by all these nasty newspaper headlines."
And what does "fundamentally strong" mean? Our houses are overpriced, and our economy is dependent on people spending money they don't have on non-productive goods imported from other countries. Our banks are short of money, our government is up to its eyeballs in debt, and unemployment is rising rapidly. Where's the strength in any of that?
And Home Office minister Jacqui Smith clearly doesn't agree with Ms Blears's cheery little assessment. According to the front page of today's Telegraph, Ms Smith's department reckons that a recession will also bring with it rising crime, increased budget pressures on the police and border controls as tax revenues fall, and worsening racial tensions.
It all adds up to a grim picture for UK plc.
Two tips to help you survive the recession
But let's take a step back a minute. Yes, recessions are painful, and all the more so when you've been using borrowed money to put one off for as long as we have. But a recession doesn't have to mean complete social collapse. Believe it or not, it's a natural part of the business cycle. And just as recessions clear out a lot of the bad, unproductive investments that should never have been made, it can also be a chance to perform a similar clean-up on the household balance sheet.
Because the reality is that for most people, recession won't be a life-changing experience. Many people will lose their jobs, but many more won't. Lots of people will lose their homes, but an awful lot more won't. For the majority of people, recession will be about saving more money, and paying down debt. They won't have to worry about keeping up with the Joneses anymore, because the Joneses will be too busy trying to stay ahead of the bailiffs.
The main thing to do is to make sure you have a savings cushion for if you end up being made redundant. So you need to save up three to six months' salary as an easily accessible emergency cash pile. You should always have one of these, but needless to say they tend to get frittered away in the good times. The basic aim is to be able to meet all your living costs for long enough to find another job, if necessary.
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