More than eight million families admit spiraling personal debts are 'a burden' with average UK household now 3,200 in the redPressure of debt has got worse since the 2008 recession, ONS survey findsSouth-East has the highest levels, Wales the lowestBritish debt mountain now approaching 100bn, based on unpaid credit cards, loans and overdrafts
16:17 GMT, 28 January 2013
16:51 GMT, 28 January 2013
More than eight million families admit their personal debts are ‘a burden’ as the country’s total debt mountain balloons to nearly 100billion, official figures revealed yesterday.
The report, from the Office for National Statistics, highlights how debt problems have jumped sharply since the recession struck in 2008.
To make matters worse, it ignores people’s mortgages, and looks only at other types of debt such as an unpaid credit card bill, an overdraft and a personal loan.
Telling: How people feel about their debt has become more serious and stressed since the recession with eight millions families feeling it is a burden
An extra 420,000 families describe their debts as either a ‘heavy’ burden or ‘somewhat of a burden’, compared to 2006 when the same question was asked.
Overall, one in two families who have debts find them a struggle, with a large chunk of their take-home pay wiped out by paying their debts every month.
For those who cannot afford to pay off their debts, the situation gets worse and worse as the interest bill on their debts escalates rapidly.
Of the 16.3million households who have debts, it says the average debt is 3,200, compared to 2,800 before the recession struck.
This is the equivalent of two month’s take-home pay for a typical worker with a full-time job earning the country’s average salary of 26,000.
Stress: The average household has 400 more debt on items like credit cards than before the 2008 recession
The ONS said the total debt – excluding mortgages – of households in Britain is 94.7billion, compared to 85.9billion before the recession began.
The situation is most acute for people between the age of 25 and 34, an age at which the average debt burden peaks at 4,300. For pensioners, the average is just 1,100.
This is because many people are having their first child at this age, an event which pushes many into debt with a long list of extra costs from a pram to a larger home.
To add to the pressure, many couple’s see their earnings drop as one parent gives up work, to switch to a part-time job or they both continue to work but spend a fortune on childcare.
Dr Howard Archer, UK economist at the consultancy IHS Global Insight, said: ‘Increased debt levels have been a major factor weighing down on consumer confidence.’ He said it has curbed people’s ‘willingness and ability to spend’ with a growing list of casualties on the high-street from Jessops to HMV going into administration.
Picture: Says its latest survey has these findings, with the debt mountain in the UK approaching 100bn
Pressure: The ONS says it is the poorest households that feel the intense burden of debt far more than the richest
Worst off: Lone parents with children have higher financial liabilities but lower average debt than a married couple with no children
Delroy Corinaldi, a director of the StepChange Debt Charity, said: ‘Stagnating wages and rising living costs continue to push household budgets beyond breaking point.
‘The financial torture facing many households shows little sign of abating.’ For millions of workers, they did not lose their job during the recession but they have been hammered by the toxic combination of paltry pay rises or pay freezes and rising bills.
A recent poll by the National Institute of Economic and Social Research said the recession had ‘a profound impact’ on workplaces from offices to factories.
Around 22,000 workers were quizzed about their life at work, how they are treated and how it has changed since 2008, the year that the downturn began.
More than one in four private sector workers have been hit by at least one annual pay cut or pay freeze, rising to 48 per cent in the public sector.