In the year up to November 2019, UK households borrowed almost as much as the Government, demonstrating that debt remains both a private and public sector issue, according to the January 2020 Money Statistics, produced by The Money Charity.
The latest data available from the Bank of England and ONS shows that UK households borrowed almost as much as the UK Government in the year to November 2019. In that period, households borrowed an additional £46.2 billion, taking total household debt to £1,669 billion. Over the same time, the UK Government increased its net debt by £48 billion, putting the country’s total net debt at £1,644 billion.
The similarity in these figures helps give an important reminder that, in looking at the wider issue of debt for the economy, and indeed across society, private sector debt can be as important, or even more important, than public sector debt. Prior to the 2008 crash, public sector debt grew gradually to around £500 billion, while household debt increased rapidly from £600 billion in 1999 up to £1,400 billion in 2008, according to Bank of England data.
The majority of this additional household debt went into the housing market, which in turn raised house prices. Similarly, in the year to November 2019, most additional household debt, £39.6 billion, went into the housing market. Overall consumer debt increased by £6.5 billion, while within this total, credit card debt shrank by £359 million, continuing the trend we reported on previously in last month’s report.
With the Office for Budget Responsibility’s March 2019 forecast projecting that, by 2023-24, household debt will reach £2.425 trillion, an average household debt of £86,388 (assuming household numbers track ONS population projections), there appears to be no immediate likelihood of this upward trend stopping.
Paul Frost, Interim Chief Executive of The Money Charity said “At The Money Charity, we fully accept that debt is the necessary reality for nearly all of us. When taken on from a well-planned-out and considered position, it can be an effective means of achieving our financial goals and increasing our financial wellbeing. However, when debt is taken on in an unmanageable or unsustainable way, it becomes a pressing problem.”
“Clearly like any ‘average’ figure, these headline numbers are inclusive of a wide range of sustainable and unsustainable debts, but the concern remains that the ever-increasing debt levels are indicative of more and more people taking on debt which they simply cannot manage. We would urge anyone facing this sort of situation to urgently seek out one of the many sources of available support.”