Shocking new research by the Trade Union Congress (TUC) reveals unsecured household debt rose sharply in the third quarter of 2016, reaching a staggering £12,887 per household and up £1,117 on a year earlier.
Total unsecured debt ballooned in the third quarter of 2016 to reach a record high of £349bn – a huge increase on its previous £290bn peak in 2008 ahead of the financial crisis.
Unsecured debt as a share of household income is now at 27.4%, the highest it’s been for eight years, with the TUC warning weak wage growth and higher inflation could leave even more families struggling with debt.
Figures from the Office for Budget Responsibility (OBR) show that households are saving less than ever before, while Bank of England data shows consumer credit is growing at the fastest rate in 11 years.
The TUC says the growth of consumer credit is a sign the Government has failed to fix fundamental problems with the economy, such as weak pay growth and low public investment.
The worrying figures have also reignited concerns that the Government is relying on “debt-fuelled consumer spending to support the economy”, rather than investing in vital infrastructure to help build and grow the economy – a policy advocated by the Labour Party.
TUC General Secretary Frances O’Grady said: “These increases in household debt are a warning that families are struggling to get by on their pay alone.
“Unless the government does more for working people, they could end the New Year poorer than they start it.
“Employment may have risen, but wages are still worth less today than nine years ago.
“The government is relying on debt-fuelled consumer spending to support the economy, with investment and trade in the doldrums since the financial crisis.
“There’s a lot the government could do to help. Public sector workers who have suffered severe cuts to their real pay since 2010 are long overdue a decent pay rise. The minimum wage needs to keep rising so the lowest paid workers can keep up with rising prices.
“And a major programme of public investment in rail, roads, new homes and clean energy could be targeted at communities where decent jobs are in short supply.”