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

10 Jan 2020 11:29 AM

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