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.

The figures pose a challenge to the government, which was warned last year that Britain’s consumer credit bubble of more than £200bn was unsustainable. A dramatic rise in debt-fuelled spending since 2016 has also taken place against the backdrop of the Brexit vote, which triggered a rise in inflation at a time of weak wage growth.

Analysts warned that a squeeze on household incomes from benefit cuts, lacklustre wages and high inflation would continue to force poorer households to borrow more to pay basic bills.

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 report – titled “Making ends meet: are households living beyond their means?” – found that the deficit among UK households, equivalent to 1.2% of GDP, contrasted with a surplus in France equivalent to 2.7% of GDP and a surplus equivalent to 5.1% in Germany.

Last year official data showed unsecured credit – such as credit cards and payday loans – climbed to a record high of more than £205bn while the consultancy PwC said its own measure showed consumer debts rising above £300bn.

The ONS said households took out nearly £80bn in loans in 2017, the most in a decade. But they deposited just £37bn with UK banks, the least since 2011. Households accumulated more debt than they acquired in assets even when their investments in bonds, shares and pensions were included.

Anti-poverty charities warned that millions of low income households were the worst affected.

StepChange, which provides advice for indebted households, said the poorest were in constant need of credit to keep their heads above water.



The charity’s chief executive, Phil Andrew, criticised the ONS for saying that households were living beyond their means, which he said implied they could cut back if they wanted to.

“It’s really unfortunate that this very useful data is so heavily sprinkled with the phrase that households are ‘living beyond their means’. The reality is that too many households, here in Britain, in 2018, simply cannot make ends meet, however hard they try.”

He added: “Not having enough money to make ends meet is not the same thing as living beyond your means – which implies you have a choice, when too many people do not.”

According to ONS figures, the poorest 10% of households spent two and a half times their disposable income, on average, in the financial year ending 2017 – while the richest 10% spent less than half of their available income during the same period.



The ONS said a rise in interest rates, expected to be pushed through by the Bank of England next week, could encourage greater saving and an improvement in household finances.

But AJ Bell’s Selby said: “For people having to borrow to make ends meet, saving for the future might feel like a luxury they simply cannot afford.”