Record high for family debt shows that we don’t have a recovery that works for all, says TUC

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8 January 2015

New analysis published today (Friday) by the TUC shows that household debt is rising again, with total unsecured debt reaching a new high.

Total unsecured debt (including consumer credit and student loans, but excluding mortgages) rose to £319bn in the third quarter of 2015 – a record high, and well above the £290bn peak in 2008 ahead of the financial crisis.

The TUC analysis finds that unsecured debt as a share of household income is now 26.5% – the highest it’s been for five years.

The analysis also finds that unsecured debt per household rose to £11,800 in the third quarter of 2015, which is up £600 on a year earlier. On this per household measure, debt has never been higher.

Earlier this week the Bank of England published an analysis showing that household borrowing surged in the run up to Christmas. The monthly cash rise in consumer credit for November 2015 was the highest since February 2008.

However, the TUC warns that there is a much bigger problem than just ‘Christmas on credit’. The analysis published today follows the recent forecast by the Office for Budgetary Responsibility that UK household spending was set to be £40bn in deficit for 2015 – the highest on record. And the Bank of England’s Chief Economist Andy Haldane recently told the Treasury Select Committee that consumer credit is “picking up at a rate of knots”.

The TUC says that the growth of consumer credit should worry the government as a signal that fundamental problems with the economy have not been fixed.

TUC General Secretary Frances O’Grady said: “Rising household debt signals that too many people are still struggling to make ends meet. With pay growth slowing, and households facing a lost decade on wages, it’s no surprise that more families are relying on borrowing to meet the costs of day-to-day essentials.

“Although employment has risen, wages are still worth less today than eight years ago. This has left families struggling to meet the rising cost of living. We need a recovery where families can afford to pay their bills and raise their children without relying on credit cards and payday loans.

“The government must do more to increase job security, with the hours and pay that people need to get by. Otherwise we’ll be heading back to the same problems that led to the last financial crash. Ministers should lead by example and bring an end to years of real-terms public sector pay cuts.”

NOTES TO EDITORS:

Comparison of UK household debt data, 2000 to 2015

Annual quarter

Unsecured borrowing £bn

Disposable income (rolling annual sum)

£bn

Debt to income

%

Number of households millions

Debt per household

£

2000 Q3

158

679

23.2

24.4

6,462

2001 Q3

173

722

24.0

24.5

7,048

2002 Q3

200

747

26.7

24.8

8,059

2003 Q3

211

776

27.2

24.9

8,461

2004 Q3

231

807

28.6

25.0

9,238

2005 Q3

250

837

29.9

25.2

9,909

2006 Q3

263

878

29.9

25.4

10,350

2007 Q3

278

922

30.1

25.6

10,847

2008 Q3

290

959

30.3

25.9

11,215

2009 Q3

281

997

28.2

26

10,791

2010 Q3

283

1055

26.8

26.2

10,769

2011 Q3

283

1075

26.3

26.4

10,719

2012 Q3

280

1114

25.1

26.6

10,526

2013 Q3

288

1142

25.2

26.7

10,793

2014 Q3

300

1159

25.9

26.7

11,247

2015 Q3

319

1205

26.5

27

11,821

Source: Office for National Statistics (ONS)

- Note on methodology: Unsecured debt is defined as total loans to households, excluding lending secured on dwellings. This means that mortgages are not included, but lending such as bank loans, payday loans, credit cards, store cards, purchase loans and student loans are all included. The figures are derived as total loans (ONS code NNRE) minus loans secured on dwellings (NNRP). Income is an annual figure derived as a sum of the latest four quarters of household disposable income (QWND). Data sources: UK Economic Accounts, tables 6.1.4 (for income) and 6.1.9 (for debt), Office for National Statistics.

- Bank of England release from 4 January 2016 on Money and Credit: November 2015: www.bankofengland.co.uk/statistics/documents/mc/2015/Nov/moneyandcredit.pdf

- The charity Step Change provides free advice on problem debt. More information can be found at www.stepchange.org

- All TUC press releases can be found at www.tuc.org.uk

- Follow the TUC on Twitter: @The_TUC and follow the TUC press team @tucnews

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