In the red: Household debt spirals to worst point on record in UK

Alasdair Clark

New data analysis from the national statistics body has shown British households spend around £900 more than they earn

BRITISH HOUSEHOLDS are failing to make ends meet, spending more on average than their total income as the cost of living crisis worsens, in what is the worst personal debt figures on record. 

In 2017, the average UK household spent £900 more than they earned, borrowing on credit or using savings to make up the deficit, according to research by the Office for National Statistics [ONS]. 

ONS said that the 2018 reality was worse than in the run-up to the financial crisis in 2008 where reckless lenders offered 100 per cent mortgages to home buyers without a deposit. 

Total household debt totalled £25bn, the highest figure ever recorded since the last time outgoings exceeded income in 1988, when the figure was £0.3bn.

The very poorest households are being hit the hardest, spending two and half times more than their income on average compared to the richest 10 per cent, who spend around half of their income. 

Poor wage growth and rising prices mean that people could be more commonly forced to turn to short-term high risk, high-interest loans from “payday lenders” in order to meet basic bills such as electricity. 

Scotland’s tenants’ union, Living Rent, were unsurprised at the new figures, saying it was a fight for survival. 

Craig Paterson, a spokesperson for the union, said: “The spiraling level of debt is of no surprise in an economy that has had effectively zero wage growth and ever increasing living costs for over a decade now. 

“The idea that people are living beyond their means is laughable, their not, their struggling to survive and having to beg borrow and steal just to pay the bills. We have an entire generation that’s growing up with insecure work, inadequate wages, and extremely high housing costs. They’re being consumed by debt just trying to survive.”

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Wealth inequality also showed a sharp rise, with the wealthiest in society five times better off than the poorest.

The data also shows the UK has moved into a new category of being one of the high personal debt countries in the global economy alongside the United States and Canada, previously having a similar profile to Germany and France. 

The deficit in UK households was equivalent to -1.2 per cent of GDP, similar to the US at -1.4 per cent of GDP, contrasted with a surplus in France and Germany equivalent to 2.7 per cent and  5.1 per cent of GDP respectively. 

Labour’s shadow chancellor John McDonnell said the figures were the result of “brutal” Tory economics:  “In the same week that the Tory government delivered a slap in the face to workers over public sector pay, the ONS findings show the disastrous impact of eight years of austerity on the living standards of families.

“For the first time in nearly 30 years, we see average household outgoings surpassing incomes.

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“The ONS findings are a stark example of how brutal Tory pay restraint and austerity has led to living costs outstripping earnings for families.”

Trade unions were sharply critical of a UK Government public-sector pay offer announced earlier this week, which included a 1.5-3.5 per cent for teachers in England and Wales, with inflation at 2. 4 per cent.

The report, titled “Making ends meet: are households living beyond their means?”, did not provide specific information relating to Scotland.

The inability to meet basic bills was highlighted recently north of the border, with a dramatic rise in the number of warrants issued for the non-payment of council tax, which the Scottish Government attributed to Tory welfare cuts. 

The Scottish Government said it was committed to making council tax fairer to help struggling households, but Scottish Labour has criticised the SNP’s abandonment of its 2007 pledge to abolish council tax.

If you are worried about debt, you can get free, independent advice from charities such as Stepchange.

Picture: Stock