John McDonnell has accused the government of relying on millions of British families going further into debt in order to meet Treasury targets.

The shadow chancellor said families were set to borrow £445bn by the end of the parliament. He also highlighted official figures showing the ratio between household debt and income had reached a five-year high, with forecasts suggesting it will hit 150% by 2022.

That means families will have amassed debts worth a year and a half’s income – which Labour warned could result in people falling into financial difficulties.

McDonnell is planning for the Labour party to focus heavily on the question of household debt as part of its new year strategy.

“The alarming increase in household debt at a time when wages are not keeping up with prices is creating the perfect storm for our economy,” McDonnell told the Guardian.

“There needs to be more done to protect working households from extortionate rates of interest, and also ensure that their earnings are not being squeezed just so Philip Hammond can pretend to meet his own targets, which he has so far failed to meet.”

The Labour frontbencher said his party had already promised to cap interest on insecure lending, but would be unveiling a string of further interventions in 2018 about how to protect households from burgeoning debt.

He has described the situation as a “personal debt crisis” with levels of unsecured borrowing predicted to hit a record of £19,000 per household by the end of this parliament.

Analysis from Labour shows unsecured debt is on course to exceed £15,000 per household next year and could go on to exceed £19,000 per household by 2022 if it follows the current trajectory.

It is understood Labour plans to focus on the issue in the new year, warning that the continuing squeeze on wages and the high level of inflation are contributing to high levels of personal debt.

McDonnell’s team said “buried in the detail” of the Office for Budget Responsibility forecasts – released alongside last month’s budget – were figures showing a shift for UK households from an £85.7bn surplus in 2010 to a £2.8bn deficit in 2017.

“Rather than set out a proper investment plan for our country, the chancellor is relying on millions of British families going further into debt to hit his own targets,” added McDonnell. “Philip Hammond should be seeking to rebalance the economy away from an over-reliance on borrowing and debt, and seriously tackle the cost of living crisis as wages fail to keep up with prices.”



Andrew Bailey, chief executive of the Financial Conduct Authority, told the Guardian recently that he was worried about the numbers needing loans to make ends meet. He said people working in the gig economy, often without guaranteed hours, were in special need of credit to smooth their incomes.

The regulator warned that the government needed to step in to help tackle the mountain of debt being racked up by the most vulnerable consumers in Britain.

As part of a series examining the billions in unsecured consumer credit amassed by households in Britain, the Guardian found there were 8.3 million people in the UK with problem debt.

The debt charity StepChange released data showing that the proportion of its clients falling behind on payments rose above 40% in the first half of 2017.

A spokeswoman for the Treasury said: “We are building an economy that is fit for the future. The budget and our industrial strategy set out a balanced approach to reducing the deficit, supporting vital public services and investing to improve productivity.

“We are firmly on the side of working families, and are helping them keep more of what they earn. We are cutting taxes, increasing basic pay, freezing fuel duty and helping first-time buyers onto the housing ladder.”

Officials have said they recognise that families are concerned about debt, have cracked down on payday loans and are setting up a new single financial guidance body.