John McDonnell, the Shadow Chancellor of the Exchequer has warned that the UK is in the grip of a personal debt crisis. He states levels of unsecured borrowing are predicted to hit a record £19,000 per household by the end of this term of Parliament.
He went on to state that there has been in an increase in debt level, to more than £14,000 per household this calendar year alone.
Labour’s research shows unsecured debt is on course to exceed £15,000 per household in this calendar year (2018) and could go on to exceed £19,000 per household by the end of 2022 if the debt level follows the current trajectory.
Labour will increasingly focus on this household debt issue this calendar year. It will warn that the continuing squeeze on wages and a higher level of inflation are contributing to high levels of personal debt.
Mr McDonnell stated “the alarming increase in average household debt already means that many families in our country have struggled over the Christmas holiday period”.
He has called on the Government to intervene to head off the personal debt crisis, arguing that more families and households are being pushed further into unmanageable debt as wages fail to keep pace with living costs.
The Labour research was based on the most recent average household debt figures from the Office for National Statistics (ONS).
Inflation started outstripping pay rises at the beginning of 2017 marking a return to the pay freeze that took hold after the financial crisis and then began to ease in 2015.
Figures from the ONS for unsecured personal debt do not include secured borrowing such as mortgages. Debts such as credit cards, store cards, bank loans etc are included.
The total amount of unsecured debt was nearly £400 billion in the third quarter of 2017 and Labour’s prediction is based on ONS figures for unsecured loans from the economic outlook which was published in November 2017.
The warnings are nothing new; Andrew Bailey, Chief Executive of the Financial Conduct Authority has warned that the Government needs to step in to tackle the mountain of debt already being wracked up by the most vulnerable customers in Britain.
There are a couple of other worrying pointers that are worthy of note. The debt charity StepChange released data last month showing the proportion of its clients falling behind on debt payments rose above 40% in the first half of last year. Also, as part of an investigation 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 debts.
If you are struggling with debts you are no longer able to manage it is vital you speak with an insolvency specialist at the earliest opportunity. Call Farleys Solicitors on 0845 287 0939 or email us today.