Latest ONS data suggests that Brits are living beyond their means as household debt has increased to 133% of disposable income. Household debt per head has been increasing constantly since the start of 2013 while household debt of the country has dramatically increased in the last 5 years.
Many believe the government program of austerity is shifting government debt onto the books of citizens who are being forced to live beyond their means.
Household debt has increased every since 2009.
The increase in debt as a percentage of disposal incomes is increasingly worrying as despite household debt climbing in nominal terms the ONS have recorded that as a percentage of disposable income it has remained level despite real wages decreasing across the UK. This would suggest the data manipulation is not enough to hide the dramatic increase in household debt seen above.
The picture may be even worse than shown as unsecured lending has increased to record levels. This is short term debt such as credit card debt and overdrafts rather than debt such as mortgages.
When polled most people perceive both their personal finance and the economy as a whole will worse over the next year. This is to be expected with a No Deal Brexit looming.
Head of Inequalities at the ONS Glenn Everett commenting on the data said:
“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.”
Shadow Chancellor John McDonnell has attacked the Tories on the new statistics stating only Labour can deliver and improve the economy by ending austerity.
In a statement he said:
“This should come as a wake-up call to a complacent and out-of-touch government, recklessly heading towards a catastrophic No Deal Brexit while households are having to go into the red to get by.
McDonnell has previously said that the Tory rollout of Universal Credit has been a contributing factor to the rapid rise in household debt.
You can read our Deputy Editor in Chief’s, Seb Chromiak, full analysis of how government fiscal policy is driving this increase in household debt, and the damage this could cause, here.
Analysis from Iwan Doherty- Editor in Chief
The rise of household debt is a pressing issue in our economy. Ever increasing debt is not sustainable and if you want to know what happens when large amounts of people default on debts look up the word recession.
It might be good for the economy in the short term to have large amounts of debt being taken out to fuel spending but it is not sustainable. The government have implemented a policy that gives banks and debt charities £2 million to help them design no-cost repayment plans, however, this is not nearly enough to solve the problem.
Labour believe ending austerity will go a long way to solving the problem and there is good economic reasoning behind this. By reducing the government deficit the Tories have just shifted debt onto private citizens but even ending austerity might not be enough. Any Labour government would need concrete policy designed to get household debt back under control.