SPARE a thought for British bankers this Christmas.
The Brussels commissars have ruled that bank bonuses should be limited to one year's salary. This has spread fear and alarm among the 2700 City workers who earned more than a million last year.
And one can understand why. In Germany, only 212 bankers earned over a million euros last year. You wonder how they cope. Thankfully the British Government is challenging the EU cap on bonuses in the European Court of Justice.
The return of banker bonuses has been one indication that the British economy is in recovery, even though the finance sector was largely responsible for the crash in the first place. Following the UK Government's U-turn, and the abandonment of austerity, Britain is returning to growth.
And this is a good thing, even though the rewards going to the City are an insult to every tax-paying citizen. In the wider economy, more people are in jobs, and more will get jobs in future. Even British manufacturing industry is growing again. The UK economy is expected to grow by 2.7% in 2014, back to its pre-recession high.
But at what cost? 2013 was the year of zero-hours contracts, short-time working, payday loans, food banks. The biggest growth area in high-street retail? Pawn shops. Beggars returned to the streets of London as they always seem to do when there is a Conservative government - though this time, we are assured that they're members of Romanian criminal begging gangs. So that's alright then.
Actually, the most striking victims of this economic recovery are not beggars but people in work. 2013 was the year Britain discovered the working poor. According to a report this month from the Joseph Rowntree Foundation, more than half the people in Britain who are officially classed as in poverty actually have a job: victims of our low-pay, low-productivity culture.
The UK recovery has not been based on new products, exports or more efficient production, but on old-fashioned exploitation. Average incomes have fallen 8% since 2008. Which may not seem a lot, but this disguises a huge pressure on the living standards of those at the bottom, because the figures are skewed by the huge increase in salaries for those at the top.
Who says crime doesn't pay? The succession of financial scandals continued through 2013. We learned that Libor, the key interest rate that determines the cost of insurance and even mortgages, had been rigged by traders in our biggest banks. Some £1.3 billion was paid to customers who were wrongly sold CPP credit card insurance policies. This is on top of the £10bn repaid to people mis-sold PPI (Payment Protection Insurance).
Then there was the rate swap scandal. The Financial Conduct Authority (surely should that be MISconduct) announced last week that tens of thousands of small businesses had been sold a form of hedging insurance liable to lose them huge amounts of money. We don't know how much compensation will be paid out, but one thing we do know is that no banker is likely to be prosecuted.
The Bank of England gave hundreds of billions in cheap loans to banks in the hope that they would lend some of it to businesses. They lent it instead to people wanting to buy bigger houses. The Government encouraged this through its help-to-buy scheme which used public money to subsidise the purchase of over-priced homes, mainly in the southeast of England.
And so we have record increases in house prices - a return of the real-estate bubble that caused the banking crash in 2008. We also have yet more personal debt. Household debt has doubled in the last decade. British households now owe £1,430,000,000,000 - an average of £54,000. This is twice the figure in 2004 - and that was considered dangerous even then.
The cost of living has risen by 25% in the past five years, according to the Centre for Social Justice, the think tank set up by the Conservative Work and Pensions Secretary, Iain Duncan Smith. This has been led by increases in the cost of energy, as power companies leap-frogged each other. The profits per household of the Big Six energy companies rose 77% in 2013, according to Ofgem.
This is clearly unsustainable. And the most scary thing is that the economic recovery we are celebrating this winter has been built not on exports, not on manufacturing, but on that increase in consumer debt. We have become a country in which a large section of the population finds itself in a form of what economists call debt peonage. That means, essentially, financial serfdom. Families are chained to debts that can never be repaid.
Eventually, something has to give, and the Bank of England warned last week that it might be home ownership. This is because many families are only clinging on to their homes thanks to low interest rates - the official bank base rate of 0.5% remains the lowest in 300 years. The governor of the Bank, Mark Carney, warned last week that if, or rather when, interest rates rise to a more normal 3%, one in five home owners would be at risk of repossession. Thousands of "zombie firms" - small and medium companies surviving because banks haven't called in their loans - would also go under.
So the Bank of England will keep interest rates low for as long as it can. But any kind of economic recovery built on these fundamentals must be suspect. House prices have been rising at record levels in Greater London, which concentrates national wealth in the hands of those living in the southeast. Average prices in inner London boroughs are already over £1m.
And the nature of the recovery, based on a housing boom and bank bonuses, means the rest of Britain is expected to wait until a little of this "trickles down" to the provinces. Though how that is supposed to happen is a mystery. As the Business Secretary Vince Cable put it last week, London is still sucking the life out of the rest of the country. Britain's recovery is imbalanced, and dominated by the City of London.
Perhaps Scotland's destiny is to become a tartan theme park. The pivotal economic event in Scotland was the face-down between the Unite union and Ineos at Grangemouth petrochemical refinery. We came within an inch of losing that crucial industrial installation altogether. Though on the positive side, the Clyde shipbuilders appear to have a relatively secure future building British warships.
And at least we haven't seen complete social breakdown in this recession. People have not suffered utter destitution as they did in the Great Depression. There has been no rise in extremist parties as there was in the 1930s, and Europe held together in 2013 despite the sovereign debt problem. So far, it looks as if a relatively peaceful resolution to this terrible financial crisis is possible. And for that, at this time of year, we can only be thankful.
We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis. If you're a relatively new user then your comments will be reviewed before publication and if we know you well and trust you then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules
Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.