A recent TUC (Trades Union Congress) report shows that the average UK family will be £15k in debt by the year 2020. The shocking report revealed that UK households are heavily dependent on credit cards and payday loans. Unsecured debt per household expected to hit £13,900 by the end of 2017. The TUC reports that Britain is in a living standards crisis given that millions of families in the UK use credit cards and payday loans to pay for essentials. According to the report, UK households are ”running on empty”.
Back in 2016, unsecured debt per UK family stood at £13,200 which is the highest ever unsecured debt figure since Britain and the world at large was hit by the financial crisis. The figure is only a small margin below the £13,300 peak in 2007. The report highlights unsecured debt as debt from; payday loans, credit cards, store cards, car loans, bank loans and student loans (mortgage payments are excluded). The TUC report blames the low investment and low wages for the debt crisis and stresses that these difficulties have to be solved by the next government if we expect the average debt per household to reduce.
UK wages are still below the pre-financial crisis level by approximately £20 a month. This simply shows that it has taken more than a decade for UK wages to recover fully. What’s more shocking is; official figures indicate that real wages have begun falling again. The TUC report believes that the increasing level of household debt in the UK should be the most important concern for political parties and the next government given the UK economy heavily relies on household spending to sustain growth.
Consumer spending has skyrocketed in the past eight years. One notable segment is the amount of money Britons borrow to buy new cars every year. The figure currently stands £30 billion. This is against the official government debt figure of £1.7 trillion whose interest payments demand £10 million monthly as of April 2017. The savings ratio has also reached a record low. The latest figures show that the ratio of income to savings in the UK stands at just 3.3%.
The UK household debt crisis looks worse from a legal perspective given County Court judgments relating to consumer debt have risen to 35 percent in England and Wales. The debt crisis has also attracted the attention of the Bank of England which has currently launched an investigation on unsecured lending to UK households.
According to the TUC General Secretary, Frances O’Grady, the increasing household debt is pushing Britain’s economy into a danger zone. O’Grady attributes the problems to the fact that UK wages haven’t recovered fully since the financial crisis forcing families to rely on payday loans and credit cards to cater for household bills. She stresses that the next government needs to act urgently to increase the minimum wage as well as end pay restriction affecting public servants like firefighters, nurses and midwives otherwise economic growth won’t be sustainable.
According to O’Grady, the next government must do more for many parts of Britain where good jobs are minimal or non-existent. She argues that communities lacking well-paying jobs have an opportunity to thrive in the future if the government invests adequately in training, broadband, transport links and decent housing.