New analysis published today by the TUC shows that household debt rose sharply over 2019, with unsecured debt (debt other than mortgages) reaching record highs:
- Unsecured debt per household rose to £14,540 in the third quarter of 2019, which is up £430 on a year earlier.
- Total unsecured debt rose to £407bn in the third quarter of 2019 – the first time it has gone over £400bn and well above the £286bn peak in 2008 ahead of the financial crisis.
- Unsecured debt as a share of household income is now back to the same record high of 27.5% that it reached in 2008 at the outset of the financial crisis.
The TUC says government austerity, the rise of insecure work and years of wage stagnation are the key reasons behind the increase in unsecured debt.
Real wages are on average lower today than before the financial crisis. This has pushed many working households towards borrowing to get by.
TUC General Secretary Frances O’Grady said: “It’s not about keeping up with the Joneses. This is hard-up families borrowing just to scrape by. It’s for paying the rent, heating the home and feeding the kids.
“The reason we’re seeing this is bad management of the economy. Wages are still worth less than a decade ago. Too many people have insecure jobs with uncertain hours. And vital support like working tax credits has been cut.
“No more excuses – the government must put together an urgent plan to improve living standards and to help families struggling with dangerous levels of debt.”
The TUC says that the main reasons for weaknesses in wages and family finances are:
- The minimum wage is too low: It should be raised to £10 as quickly as possible.
- Too many people are in insecure jobs: 3.7 million people are in some form of insecure work, including a million on zero hours contracts. Government should ban zero-hours contracts now.
- Wage growth has been slow because workers have too little power to bargain for higher wages: Trade unions must be given the freedom to enter all workplaces and organise collective wage bargaining; and insecure workers must have stronger rights.
- Universal Credit is pushing families into hardship: The five-week wait in Universal Credit is unnecessary and is causing extreme hardship for claimants. The government should end the five-week wait now and stop the rollout of Universal Credit.
- A decade of austerity has damaged the economy: Growth is flatlining, and business investment is grinding to a halt. The UK needs a genuine end austerity and an investment plan to boost growth across the nation.