UK household ’ finances are spiralling out of control and racking up debt with the average family going nearly £1,000 into the red, it has been revealed.
British household finances among most indebted in major western countries, ONS says
British households spent around £900 more on average than they received in income during 2017, pushing their finances into deficit for the first time since the credit boom of the 1980s.
The Office for National Statistics said the shortfall amounted to nearly £25bn – equal to almost a quarter of the NHS budget – and the overspend was mostly paid for with borrowed money, though households also ran down savings.
Tom Selby, a research analyst at financial adviser AJ Bell, said the figures presented ministers with a significant challenge as they sought “to build financial resilience in the UK”.
Researchers at the ONS said the situation was worse than at any time on record after the £25bn deficit last year surpassed the £300m deficit recorded in 1988. British household finances also slumped from being among the most solvent in the 1990s to being among the most indebted compared with households in other major western countries.
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.”
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.
“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.
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Source : https://www.theguardian.com/money/2018/jul/26/household-debt-in-uk-worse-than-at-any-time-on-record
Source : https://www.commonspace.scot/articles/13081/red-household-debt-spirals-worst-point-record-uk