The TUC (Trades Union Congress) has released figures showing that average unsecured debt per household in the UK has reached a new peak of just under £15,400.
The research shows an increase of £886 per household in the last year alone, and now totals £428bn collectively as of the third quarter of 2018.
Mortgage debt was excluded from the TUC analysis, but student loan debt was included. Debt from student loans has been increasing significantly in recent years, mainly due to the drastic fee increase in 2012, and smaller increases in the years since.
Since 2008’s economic crisis, Britain has seen an increase of almost 50% in unsecured debt according to the TUC’s research. As a share of household income, unsecured debt has now reached the highest level ever seen, at 30.4%, and the total is far above 2008’s level of £286bn.
The Bank of England released figures estimating the debt to be around half of what the TUC estimates, but did not include student loan debt in their figures. According the the Bank of England, there has been a steady growth in consumer credit since the last quarter of 2016.
The TUC and various other analysts explain the trends shown by their data by citing public spending cuts due to government austerity measures, as well as a lack of significant wage growth in recent years.
The trade union body claims that people are now actually worse off than before 2008’s financial crisis as millions are dependent on borrowing in order to make ends meet. The TUC cites zero-hours contracts and the ‘gig economy’ as being other contributing factors to this bleak state of affairs.
This echoes a statement made by Andy Haldane, The Bank of England’s chief economist, when he described the gig economy as being the culprit for a decade’s worth of stagnated wage growth across Britain.
Frances O’Grady, the TUC general secretary, condemned the government’s reliance on household debt to bolster the economy, saying: “Household debt is at crisis level. Years of austerity and wage stagnation has pushed millions of families deep into the red. The government is skating on thin ice by relying on household debt to drive growth. A strong economy needs people spending wages, not credit cards and loans.”
O’Grady also claims that "our economy is not working for workers. They need stronger rights and bargaining powers" and that minimum wages need to be increased to at least £10 an hour "as quickly as possible". Despite the National Living Wage due for a rise in April, it will only raise to £8.21 an hour (from the current £7.83) for workers aged 25 and over.
O’Grady believes that trade unions need more freedom to operate within workplaces in order to facilitate increases in wages via collective bargaining.