By 2019 total UK household debt will be 182 per cent of household income
George Osborne’s economic plans depend on household debt growing three times faster than pay over the course of the next parliament, according to new analysis.
While wages are forecast to grow at 16 per cent, total household debt is forecast to grow 2.7 times as fast at 42 per cent, according to the TUC.
Unsecured household debt is also forecast to grow 4.5 times as fast as wages – by 70 per cent between 2015 and 2019, with average unsecured debt of around £29,000 per household by 2019.
The analysis used forecasts by the Office for Budget Responsibility (OBR) to compare earnings and household borrowing for the period. Secured debt refers mainly to mortgages while unsecured debt is largely consumer credit and overdrafts from banks and other lenders. Total household debt includes both secured and unsecured debt.
If the forecasts are borne out, by 2019 total UK household debt will be 182 per cent of household income, much higher than the previous high of 167 per cent immediately prior to the 2008 crash.
Commenting on the figures, TUC general secretary Frances O’Grady said:
“The chancellor seems to be hoping for a do-it-yourself recovery, where families run their own deficits and stoke-up their own debt. An average household debt of £29,000 is an awful lot of payday loans, credit card debts and bank overdrafts.
“This is exactly what happened before the last crash, and why we had to bail out banks full of bad debt. If interest rates rise, then many households will be in immediate difficulty.
“In a healthy economy, workers’ wages grow faster than their debts . What we really need is a wages-led recovery, not a debt-fuelled bubble. If this chancellor continues he will be doing the exact opposite of what we need – his huge cuts to vital services will slow the economy while he encourages families to spend money they don’t have instead. It’s not so much a long-term plan as a dodgy flat-pack self-assembly recovery.”
Forecast for UK wages and household debt from 2015 to 2019
|
Wages (Q1 2007 = 100) |
Total household debt (£ billions) |
Secured debt (£ billions) |
Unsecured debt (£ billions) |
|
|
2015 |
115.5 |
1,822 |
1,370 |
452 |
|
2019 |
133.5 |
2,590 |
1,822 |
768 |
|
Change |
+15.6% |
+42.2% |
+33.0% |
+69.9% |
Source: ONS
The average unsecured debt per household is based on the Office for National Statistics (ONS) figure of 26.7 million UK households in 2014.
6 Responses to “Household debt to grow nearly three times faster than wages under Osborne’s plans”
Leon Wolfeson
“While wages are forecast to grow at 16 per cent”
By the same people who have constantly over-estimated wage growth through this parliament, no doubt.
Oh, and what happens when you exclude the top and bottom 3%, say, hence excluding the city? Oops!
The reality is that people are *not* borrowing on that scale, and spending even on vital things like food…are likely to drop. Because we have a bubble in the city, not a recovery.
Joff
Could the author of this article or the TUC G.S. come up with an idea as to how we stop this from happening, instead of just pointing at things they think are wrong and saying “that’s bad”?
David Davies
It is all part of the `long term economic plan’, which we are continually assured is `working’.
sarntcrip
not working for the disabled and elderly who about to face yet more cuts to their social care by tory kent county council another example of tories making those with the narrowest most vulnerable shoulders shoulder the greatest burden such is their sickness for bullying the weakest because they can’t fight back.
remarx
If this is a correct forecast then we see history repeating itself – again. People encouraged to borrow more money than they can afford followed by a rise in interest rates that results in a huge crash – again. It’s Thatcherism all over – again. Will we never learn?