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TUC: Unsecured debt hits new peak of £14,540 per household

  • Average household debt is now 31% above its peak before the financial crisis
  • Government needs urgent plan to raise living standards and help families with dangerous levels of debt, says TUC

New analysis published today (Friday) by the TUC shows that household debt rose sharply over 2019, with unsecured debt (debt other than mortgages) reaching record highs:

  • Unsecured debt per household rose to £14,540 in the third quarter of 2019, which is up £430 on a year earlier.
  • Total unsecured debt rose to £407bn in the third quarter of 2019 – the first time it has gone over £400bn and well above the £286bn peak in 2008 ahead of the financial crisis.
  • Unsecured debt as a share of household income is now back to the same record high of 27.5% that it reached in 2008 at the outset of the financial crisis.

The TUC says government austerity, the rise of insecure work and years of wage stagnation are the key reasons behind the increase in unsecured debt.

Real wages are on average lower today than before the financial crisis. This has pushed many working households towards borrowing to get by.

TUC General Secretary Frances O’Grady said:

“It’s not about keeping up with the Joneses. This is hard-up families borrowing just to scrape by. It’s for paying the rent, heating the home and feeding the kids.

“The reason we’re seeing this is bad management of the economy. Wages are still worth less than a decade ago. Too many people have insecure jobs with uncertain hours. And vital support like working tax credits has been cut.

“No more excuses – the government must put together an urgent plan to improve living standards and to help families struggling with dangerous levels of debt.”

The TUC says that the main reasons for weaknesses in wages and family finances are:

  • The minimum wage is too low
    It should be raised to £10 as quickly as possible.
  • Too many people are in insecure jobs
    3.7 million people are in some form of insecure work, including a million on zero hours contracts. Government should ban zero-hours contracts now.
  • Wage growth has been slow because workers have too little power to bargain for higher wages
    Trade unions must be given the freedom to enter all workplaces and organise collective wage bargaining; and insecure workers must have stronger rights.
  • Universal Credit is pushing families into hardship
    The five-week wait in Universal Credit is unnecessary and is causing extreme hardship for claimants. The government should end the five-week wait now and stop the rollout of Universal Credit.
  • A decade of austerity has damaged the economy
    Growth is flatlining, and business investment is grinding to a halt. The UK needs a genuine end austerity and an investment plan to boost growth across the nation.

Editors note

  • UK unsecured borrowing in total and per household, 1989-2019

Annual quarter

Unsecured borrowing £billions

Disposable income (rolling annual sum)

£billions

Debt to income

%

Number of households thousands

Debt per household

£

1989 Q3

83

373

22.3

22,316

3729

1990 Q3

91

418

21.9

22,544

4053

1991 Q3

95

461

20.7

22,863

4170

1992 Q3

92

495

18.6

23,008

4007

1993 Q3

89

524

17.0

23,140

3845

1994 Q3

94

549

17.0

23,268

4020

1995 Q3

101

576

17.5

23,431

4297

1996 Q3

108

616

17.5

23,583

4564

1997 Q3

117

643

18.1

23,728

4915

1998 Q3

130

662

19.7

23,882

5457

1999 Q3

143

692

20.7

24,067

5961

2000 Q3

158

740

21.3

24,281

6498

2001 Q3

173

776

22.3

24,486

7066

2002 Q3

200

802

24.9

24,609

8121

2003 Q3

208

828

25.1

24,729

8401

2004 Q3

230

865

26.5

24,856

9235

2005 Q3

245

904

27.1

25,060

9778

2006 Q3

258

950

27.1

25,235

10,207

2007 Q3

270

1,002

27.0

25,420

10,634

2008 Q3

286

1,044

27.3

25,632

11,141

2009 Q3

277

1,067

25.9

25,824

10,723

2010 Q3

280

1,096

25.5

26,038

10,742

2011 Q3

275

1,113

24.7

26,313

10,463

2012 Q3

271

1,157

23.4

26,539

10,206

2013 Q3

277

1,198

23.1

26,723

10,354

2014 Q3

281

1,245

22.6

26,947

10,425

2015 Q3

301

1,308

23.0

27,166

11,077

2016 Q3

331

1,341

24.6

27,398

12,065

2017 Q3

362

1,368

26.4

27,594

13,102

2018 Q3

392

1,436

27.3

27,793

14,107

2019 Q3

407

1,482

27.5

27,985

14,540

 

  • Note on methodology: Unsecured debt includes bank loans, payday loans, credit cards, store cards, purchase loans and student loans, but excludes mortgages. The figures are from the balance sheet for the household and non-profit institutions serving households sector, table 6.1.11 of the UK Economic Accounts July to September 2019, comprising short-term loans issued by UK (NNRG) and overseas (NNRK) banks and building societies and ‘other (i.e. non-mortgage) long-term lending issued by UK residents’ (NNRU). Disposable income is a rolling annual figure: a sum of the latest four quarters of household disposable income (QWND). Data sources: Office for National Statistics, UK Economic Accounts, tables 6.1.4 and 6.1.11. The household count is based on the ONS projections issued 15 May 2019: https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationprojections/datasets/householdprojectionsforengland
  • Revisions to figures: Revisions to the official data (arising in part from a changed treatment for student debt write-offs) mean that the figure for household debt is lower than we reported for this quarter last year. However, with the revisions, household debt remains at a record high, as past figures, including Q3 2018, were also revised.
  • Rising insolvency rate: Individual insolvencies have drastically risen over the past year. Official insolvency statistics show that in the third quarter of 2019, there was a total of just under 31,000 individual insolvencies – a 23% increase on the same period last year. In total there have been over 93,000 insolvencies in 2019, which is the highest level at this point of the year since 2010.
  • Latest data on consumer credit: Bank of England figures on household credit show consumer credit growth compared to the previous year slowing, but still high at a rate of 5.7% for November 2019: https://www.bankofengland.co.uk/statistics/visual-summaries/household-credit 
  • Debt and wealth: The latest round of the ONS’s Wealth and Assets Survey, linked to above, shows that households in the lowest wealth decile are almost twice as likely as those in the highest wealth decile to have financial debt: https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/householddebtingreatbritain/april2016tomarch2018
  • Average earnings since the financial crisis: Real median weekly wages are still £14 (3%) below their 2008 level. https://www.tuc.org.uk/blogs/11-years-after-crash-wage-crisis-continues-working-people
  • Support for households with problem debt: The charity Step Change provides free advice on problem debt. More information can be found at www.stepchange.org

 

Original article link: https://www.tuc.org.uk/news/unsecured-debt-hits-new-peak-ps14540-household-tuc-analysis

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