There’s growing evidence of a household debt crisis, and the government needs to get a grip of it.
Yesterday’s ONS figures on personal and economic well-being in the UK provide the latest bit of evidence on this. They show that unsecured lending per person is at a record high, as is the ratio of unsecured lending to household disposable income. The ONS chart:
And there’s concerns about how debt is impacting on people’s wellbeing. Glenn Everett, the ONS’s Head of Inequalities, says that, despite some reasons to be positive, people aren’t reporting any increases in their wellbeing:
“Despite high levels of employment, rising incomes and spending across UK households, people are not reporting increases in their well-being. This may be due to worries about rising debt repayments, which could be driving concerns about their future financial situation.”
These figures are just the latest in a recent spate of worrying news about debt levels.
At the end of 2018, individual insolvencies reached their highest level since the recession. This was driven by a drastic rise in the number of individual voluntary arrangements (IVAs). IVAs are formal, contractual agreements made with creditors as a formal alternative to bankruptcy. The number of IVAs is currently at a record high.
The ONS analysis resonates with TUC own figures at the start of the year . Our figures were based on debts per household rather than individual, with the measure at a record £15400, a rise of £890 compared to the year before. Even if you remove student loan debt from the equation, as some argue you should, unsecured debt per household is still at its highest level on record .
On the release of our household debt findings, government ministers chose to tenuously and erroneously rebut it. Now the ONS has published figures on the record-breakingly high level of unsecured lending, and the government’s own statistics are showing record levels of IVAs and recession-levels of insolvencies, it’ll be interesting to see if ministers continue to bury their heads in the sand.
It’s clear that as the longest pay squeeze for two centuries continues, households are increasingly turning to borrowing just to make ends meet. While government officials, and some commenters, celebrate recent minor improvements in real wages, these do little to make up for the cumulation of ten years of terrible wages. A decade-long real pay crisis hits workers hard. The government needs to address this crisis before it gets out of control.
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