George Osborne’s economic plans depend on household debt growing three times faster than pay over the course of the next parliament, according to new analysis. It is all part of the `long term economic plan', which we are continually assured is `working' by the government.
While wages are forecast to grow at 16 per cent, total household debt is forecast to grow 2.7 times as fast at 42 per cent, according to the TUC. Unsecured household debt is also forecast to grow 4.5 times as fast as wages – by 70 per cent between 2015 and 2019, with average unsecured debt of around £29,000 per household by 2019.
The analysis used forecasts by the Office for Budget Responsibility (OBR) to compare earnings and household borrowing for the period. Secured debt refers mainly to mortgages while unsecured debt is largely consumer credit and overdrafts from banks and other lenders. Total household debt includes both secured and unsecured debt.
If the forecasts are borne out, by 2019 total UK household debt will be 182 per cent of household income, much higher than the previous high of 167 per cent immediately prior to the 2008 crash.
Observers will agree this is exactly what happened before the last crash, if interest rates rise, then many households will be in immediate difficulty.
In a healthy economy, workers’ wages grow faster than their debts. A wages-led recovery is needed, not a debt-fuelled bubble say the TUC.
The average unsecured debt per household is based on the Office for National Statistics (ONS) figure of 26.7 million UK households in 2014.
If this is a correct forecast then we see history repeating itself - again. People encouraged to borrow more money than they can afford followed by a rise in interest rates that results in a huge crash say commentators. History will just repeat itself.
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