1.6 million UK households are living in extreme debt

23rd August 2016

A report by TUC and Unison suggests that about 1.6 million UK households are living in extreme debt. The report says official figures underestimate the intense burden of repayment on many families and individuals. The Britain in the Red report says households are finding it harder than ever to cope as wages have fallen.

Total unsecured debt, including car loans and credit cards, but excluding mortgages, for UK households rose by £48billon between 2012 and 2015 to £353billion.

As wages declined, the real burden of repaying debt became tougher. The TUC said 3.2 million households are in problem debt, defined as spending more than 25% of total household income on unsecured debt repayments.

About 1.6 million households are in extreme debt, paying out 40% or more of household income to creditors.

Peter Tutton, Head of Policy at StepChange Debt Charity, said: “Every week we see thousands of households struggling to keep up with their essential bills and credit repayments. Sluggish wage growth and the rise in insecure jobs have left households even more financially vulnerable. When budgets are stretched to the limit, even a small income shock can push people into serious financial difficulty. “Too many households are relying on credit to get by and this massively increases their chances of falling into severe problem debt. The Government could act quickly to give better options to hard-pressed households by completing its overdue review for a ‘breathing space’ scheme. Such a scheme would help people regain control of their finances and stop temporary setbacks turning into long term, devastating debt problems.”

Sheila Wheeler, Director of UK Debt Advice said “We are concerned to see the high levels of household debt across the UK, particularly the number of people borrowing money to cover living expenses. Our latest research estimates that 8. 2 million UK adults suffer with problem debt, with younger adults, larger families and single parents noticeably at higher risk. We know that free debt advice works but currently, only one in five people with financial difficulties is seeking advice. We are calling on everyone with problem debt or money worries, no matter how large or small, to access free advice as soon as possible using the Debt Advice Locator Tool to find free, impartial advice in their area.

“We also fully support the TUC’s call to help low income families get access to debt restructuring and insolvency support. People experiencing debt need time and support to get their finances back on track without pressure from their creditors. We acknowledge the value of this Breathing Space within the UK Financial Capability Strategy. Such a scheme already exists in Scotland as part of the Debt Arrangement Scheme (DAS) which provides people with space to get adequate support in dealing with their finances. We will continue to work with HM Treasury, the Insolvency Service and organisations across the debt sector to ensure people in debt, across the UK, have the support they need.”

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1.6 million UK households are living in extreme debt

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