BRITAIN’S FAMILIES PLUNGE £428bn INTO DEBT
BRITAIN is facing a debt timebomb as household borrowing hits a record high, figures have revealed.
The average UK family now owes £15,385 in unsecured debt, such as credit cards, loans and overdrafts.
In its annual report into the nation’s finances, the Trades Union Congress said the total amount owed rose to £428billion in the third quarter of last year.
That means each household owed £886 more than a year earlier.
The figures do not include outstanding mortgage debts, but do include student loans.
The level of unsecured debt as a share of household income is now almost a third – 30.4 per cent – the highest ever level.
This is almost 50 per cent higher than the personal debt mountain of £286 billion which preceded the 2008 economic crash.
That figure also includes student loans, but tuition fees then were £3,000 a year compared with up to £9,250 now.
Frances O’Grady, general secretary of the TUC, said: “Debt is at crisis level. Years of austerity and wage stagnation has pushed millions of families deep into the red.
“The Government is skating on thin ice by relying on this debt to drive growth. A strong economy needs people spending wages, not credit cards and loans.”
Weak wage growth has fuelled the problem, the analysis claimed, with families taking on non-mortgage debt as disposable incomes have fallen.
Although wages started picking up last year, a decade of decline has eroded consumers’ buying power.
The demand for credit is a concern for financial regulators, including the Bank of England, which has demanded tougher affordability standards for borrowers.
High street lenders curbed the supply of credit in the first quarter of 2018 by more than at any time since records began in 2007.
The rise of the “gig economy” and zero-hour contracts, which do not offer guaranteed work hours, are also said to be a significant contributing factor to the crisis.
Ms O’Grady said the minimum wage, at £7.83 an hour for over-25s, remains too low and should be raised to £10 “as quickly as possible”. It is due to rise to £8.21 an hour in April.
Ms O’Grady also said too few workers have the power to bargain for higher wages and said trade unions must be given the freedom to enter all workplaces and organise collective wage bargaining.
The data shows that, in
1998, households faced average unsecured debts of £5,456.
A decade later, just as the financial crisis was starting, that sum had doubled to £11,146.
Since 2008, households have been struggling with flat or falling incomes, at a time when prices have risen fast.
Richard Lane, a director at the StepChange Debt Charity, said: “We’re continuing to see an increase in debt problems.
“In just the first six months of 2018 the typical new client who contacted us had £13,382 of unsecured borrowing outstanding. However, problem debt is not confined to consumer credit – we now frequently see clients unable to meet basic costs such as council tax and utility bills.
“So it’s vital that new measures, such as the debt breathing space scheme currently being developed, reflect these types of debt, as well as consumer lending.” The £15,385 debt figure does not include further debts incurred over Christmas, which would be expected to push the figure even higher.
Workers expect to start the year with an average of £252 debt left over from the festive period. Shift and gig workers were hit hardest, putting £352 of festive spending on credit, according to the mobile app company Wagestream. Workers told researchers that they feared they would not be able to pay
£15k ‘unsecured debt’ now owed by average UK family £252 the average debt racked up over Christmas
off Christmas debts until May. Becky O’Connor, personal finance specialist at the life insurer Royal London, said: “Paying off debt of this size can feel like a losing battle when there is no hope of an income rise.
“It will be scant comfort that millions of other households are now in the same boat, but there are actions people can take to reduce the burden. “Those who are struggling to bring down borrowing should ensure they are on the lowest possible interest rates, avoid the trap of taking on more debt to pay off debt and seek specialist help from a free debt charity, such as StepChange.”
The TUC arrived at its figure for unsecured debt by adding up the total amount owed in bank overdrafts, personal loans, store cards, payday loans and outstanding credit card debts, as well as student loans.
The loans add a substantial amount to the figures, with most graduates now expecting to leave degree courses with £50,000 in debts.
But they are not required to make student loan repayments if they are not earning at least £21,000.
The Bank of England’s figures, which excluded student loans, gave a debt total of half the TUC’s estimate.
£50k common debt for students after university