Monday, January 07, 2019

Empty Pockets

Austerity and wage stagnation to blame for ‘crisis level’ unsecured loans, says the TUC. Britain’s household debt mountain has reached a new peak, with UK homes now owing an average of £15,385 to credit card firms, banks and other lenders. The TUC said that working families are on average worse off today than before the financial crisis. The rise of the gig economy and zero-hours contracts are also thought to be a significant contributing factor. The TUC’s £15,385 debt figure does not include further debts incurred over Christmas, which would be expected to push the figure even higher

Household debt rose sharply in 2018 as years of austerity and wage stagnation forced households to increase their borrowing  to a combined £428bn in the third quarter of 2018. The level of unsecured debt as a share of household income is now 30.4%, the highest level it has ever been at. It is well above the £286bn peak in 2008 before the financial crisis, the TUC said

Each household owed £886 more than it did 12 months previously, it said. The figures do not include outstanding mortgage debts but do include student loans. Data shows that in 1998, households faced average unsecured debts of £5,456. A decade later, just as the financial crisis was starting, that sum had doubled to £11,146. Since 2008 households have been struggling with flat or falling incomes, at a time when prices have risen fast.

TUC general secretary, Frances O’Grady, said: “Household debt is at crisis level. Years of austerity and wage stagnation has pushed millions of families deep into the red. The government is skating on thin ice by relying on household debt to drive growth. A strong economy needs people spending wages, not credit cards and loans.”

Becky O’Connor, a personal finance specialist at life insurer Royal London, said: “Paying off debt of this size can feel like a losing battle when there is no hope of an income rise on the horizon. It will be scant comfort that millions of other households are in the same boat."

O’Grady added the minimum wage, at £7.83 an hour for over-25s, remained too low and should be raised to £10 “as quickly as possible”. She also said too few workers had the power to bargain for higher wages, and trade unions must be given the freedom to enter all workplaces and organise collective wage bargaining.

Workers are expected to start the year with an average of £252 debt left over from the festive period alone. Shift and gig workers were hit hardest, putting £352 of festive spending on credit.

No comments: