8 January 2015

New analysis published today (Friday) by the TUC shows that household debt is rising again, with total unsecured debt reaching a new high.

Total unsecured debt (including consumer credit and student loans, but excluding mortgages) rose to £319bn in the third quarter of 2015 – a record high, and well above the £290bn peak in 2008 ahead of the financial crisis.

The TUC analysis finds that unsecured debt as a share of household income is now 26.5% – the highest it’s been for five years.

The analysis also finds that unsecured debt per household rose to £11,800 in the third quarter of 2015, which is up £600 on a year earlier. On this per household measure, debt has never been higher.

Earlier this week the Bank of England published an analysis showing that household borrowing surged in the run up to Christmas. The monthly cash rise in consumer credit for November 2015 was the highest since February 2008.

However, the TUC warns that there is a much bigger problem than just ‘Christmas on credit’. The analysis published today follows the recent forecast by the Office for Budgetary Responsibility that UK household spending was set to be £40bn in deficit for 2015 – the highest on record. And the Bank of England’s Chief Economist Andy Haldane recently told the Treasury Select Committee that consumer credit is “picking up at a rate of knots”.

The TUC says that the growth of consumer credit should worry the government as a signal that fundamental problems with the economy have not been fixed.

TUC General Secretary Frances O’Grady said: “Rising household debt signals that too many people are still struggling to make ends meet. With pay growth slowing, and households facing a lost decade on wages, it’s no surprise that more families are relying on borrowing to meet the costs of day-to-day essentials.

“Although employment has risen, wages are still worth less today than eight years ago. This has left families struggling to meet the rising cost of living. We need a recovery where families can afford to pay their bills and raise their children without relying on credit cards and payday loans.

“The government must do more to increase job security, with the hours and pay that people need to get by. Otherwise we’ll be heading back to the same problems that led to the last financial crash. Ministers should lead by example and bring an end to years of real-terms public sector pay cuts.”

NOTES TO EDITORS:

Comparison of UK household debt data, 2000 to 2015

Annual quarter Unsecured borrowing £bn Disposable income (rolling annual sum) £bn Debt to income % Number of households millions Debt per household £ 2000 Q3 158 679 23.2 24.4 6,462 2001 Q3 173 722 24.0 24.5 7,048 2002 Q3 200 747 26.7 24.8 8,059 2003 Q3 211 776 27.2 24.9 8,461 2004 Q3 231 807 28.6 25.0 9,238 2005 Q3 250 837 29.9 25.2 9,909 2006 Q3 263 878 29.9 25.4 10,350 2007 Q3 278 922 30.1 25.6 10,847 2008 Q3 290 959 30.3 25.9 11,215 2009 Q3 281 997 28.2 26 10,791 2010 Q3 283 1055 26.8 26.2 10,769 2011 Q3 283 1075 26.3 26.4 10,719 2012 Q3 280 1114 25.1 26.6 10,526 2013 Q3 288 1142 25.2 26.7 10,793 2014 Q3 300 1159 25.9 26.7 11,247 2015 Q3 319 1205 26.5 27 11,821

Source: Office for National Statistics (ONS)

- Note on methodology: Unsecured debt is defined as total loans to households, excluding lending secured on dwellings. This means that mortgages are not included, but lending such as bank loans, payday loans, credit cards, store cards, purchase loans and student loans are all included. The figures are derived as total loans (ONS code NNRE) minus loans secured on dwellings (NNRP). Income is an annual figure derived as a sum of the latest four quarters of household disposable income (QWND). Data sources: UK Economic Accounts, tables 6.1.4 (for income) and 6.1.9 (for debt), Office for National Statistics.

- Bank of England release from 4 January 2016 on Money and Credit: November 2015: www.bankofengland.co.uk/statistics/documents/mc/2015/Nov/moneyandcredit.pdf

- The charity Step Change provides free advice on problem debt. More information can be found at www.stepchange.org

- All TUC press releases can be found at www.tuc.org.uk

- Follow the TUC on Twitter: @The_TUC and follow the TUC press team @tucnews