Family debt close to pre-financial crisis level
Economy in 'danger zone' as workers supplement income with credit cards and loans, says TUC
Household debt is close to the level it was at immediately before the financial crisis, putting the economy in the "danger zone", says the Trades Union Congress (TUC).
Unsecured debt is now £13,200 per family, it reports, only £100 below the all-time high reached in 2007.
Based on Office for Budget Responsibility projections for the economy, this will rise to £13,900 at the end of this year and peak at £15,000 before the end of the next parliament.
Frances O’Grady, TUC general secretary, said: "The surge in household debt is putting the economy in the danger zone."
Unsecured debt includes spending on credit cards but not mortgages secured against a property. According to the Daily Telegraph, consumer debts alone rose by £1.6bn in March.
The implication is that if the default level rises, it could prompt a fresh financial downturn.
O'Grady said the underlying issue was caused by workers using credit cards and payday loans to supplement their incomes, which remain below pre-crisis levels in real terms, and called on the government needed to increase the minimum wage and lift the public sector pay freeze.
While earnings are above pre-crisis levels in cash terms, they have not recovered fully once inflation is taken into account.
Disposable income did rise for a couple of years from 2015, when inflation fell close to zero, but price rises are now back above wage increases this year, says The Guardian.