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The live now, pay later economy comes at a heavy cost for us all | Phillip Inman | Opinion

The live now, pay later economy comes at a heavy cost for us all | Phillip Inman | Opinion


Why would you want to own anything when you can rent? It is a question being asked of cash-strapped millennials whenever they think about hitting the high street.

John Lewis is the latest to tell young people they can have it all, or in most cases the bare necessities of modern life, if they would just learn to lease or rent whatever it is they need – a computer, sofa or desk chair. Don’t wait, says the department store, until you have the savings to pay for something outright (which may be never happen). Overcome those silly concerns about student loans, mounting credit card debts and a lack of savings by signing one lease or rent deal after another to get whatever you need.

Books like Chloe Timperley’s Generation Rent and Shiv Malik and Ed Howker’s Jilted Generation focus mostly on the exorbitant house prices that push young people into rented accommodation. But in recent years the range of goods available to be leased or rented has rocketed.

It is already the case that 90% of cars that leave showroom forecourts are leased for three or five years. And though there is the option to buy at the end, most people roll over the deal to upgrade to a newer or bigger car. The same principle can now be applied to sofas, chairs, curtains or standard lamps.

This US import is heralded by free market economists as simply the next stage of financialisation, which in this case allows banks to make cheap money available to those with high credit scores at the middle-to-top end of the income scale, and through a kind of sophisticated pawnbroking operation to those on lower wages. Customers are chosen according to basic financial information about their circumstances, which is then put through an algorithm.

Car leasing as we know it today barely existed 10 years ago. Now, signing a lease deal is as normal as handing over your phone number and address before entering a pub. Yet the costs from this shift in financing are considerable for society and the economy.

A life spent moving from rented home to rented home is generally not the joyful, freewheeling experience some older people think it is. YoungMinds is among many mental health charities to point out that the Covid-19 lockdown has made a bad situation worse.

How do we know it was bad to begin with? That information comes from studies such as the one conducted by the Intergenerational Foundation, a charity that funds research into the growing divide between the generations, which found that the social wellbeing of Britain’s twentysomethings declined by 70% between 1991 and 2017-18, the period for which the latest data is available.

Without the funds to live independently, young people struggled to maintain “successful long-term relationships”, which are strongly associated with higher wellbeing. The proportion of young adults who are either married or living with a partner has fallen from 36% to 13% since 1991.

Separate research by the charity last week, titled Costing Young Minds, examined the effect of having depression on an individual’s employment outcome, their use of health services, receipt of disability benefits and likelihood of premature mortality. It found that having depression between the ages of 16 and 40 years old amounts to a fiscal loss of almost £3bn per generational cohort.

More broadly, millions of households find they are unable to ride out a recession. Renters made redundant by their employers cannot keep up the payments on their home and its contents. Likewise, a mortgage payer who leases their sofa, chair and car faces losing everything should they be handed a P45.

It is in this new environment that governments must step in and pay for everyone who is vulnerable during a recession or risk the total collapse of the economy. The Bank of England must also keep interest rates low or the mortgage and leasing industries, which are built on cheap borrowing, will implode.

Last week the US central bank, the Federal Reserve, signalled that its interest rate rises of 2016 to 2018 were a mistake and took millions of families to the brink of financial ruin. It has promised to keep rates low from now on and probably for the next decade. The Bank of England also fears triggering a cascade of financial defaults if it ever raises interest rates again.

Without low rates, only the baby boomers who have bought their homes outright – and their furniture too – can survive without sophisticated leasing arrangements in the good times and massive amounts of government and central bank support in times of recession. It is a society dressed in a designer suit with very little underneath. Great when the sun shines and not so good when the weather is chilly.


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