Britain’s household debt time-bomb


DESPITE all the propaganda pumped out by Osborne in his budget speech last week, about UK capitalism ‘walking tall’ and well on the way to a glorious future of prosperity, facts have the annoying (for him) habit of exploding the fantasy of recovery that he is so desperate to push.

The latest rebuttal of Osborne’s claim that savage austerity cuts inflicted on the working class have somehow saved British capitalism from collapse following the world crisis of 2008, appeared yesterday in a report issued by the accountancy firm PricewaterhouseCoopers (PwC).

This report into the Consumer Credit market entitled ‘Precious Plastic: How Britons fell back in love with borrowing’ once again highlights the debt time-bomb that exists in every household in the country.

It underlines the fact that the so-called ‘fragile recovery’ of British capitalism has been built on the quicksand of personal debt.

The average UK household will, by the end of next year, owe £10,000 of unsecured debt. The total amount of unsecured household debt rose by £20 billion in 2014, a 9% increase, the fastest rate of growth for ten years.

This far exceeds the borrowing levels before the banking crisis of 2008 that shattered the world capitalist economy.

In 2014 this debt reached £239 billion, representing an average debt of £9,000 per household, while the projected increase this year represents a debt crisis that is out of control and heading for a crash that will swamp families and drive them into destitution. On top of unsecured debt lies secured loans, mainly in the form of house mortgages.

When secured loans are added to unsecured loans (credit cards, bank loans and overdrafts etc) the picture becomes even more unsustainable. The ratio between both forms of debt and earnings will become 172% by 2020 according to this report, a level that once again exceeds its previous peak just before the banking collapse.

The PwC analysis shows even a small increase in interest rates spells disaster for households. A 2% increase in interest rates on the combined debt would leave households needing an extra £1,000 a year just to cover the additional interest costs on these loans.

The dramatic rise in unsecured loans has seen increased use of credit cards as workers and sections of the middle class – faced with pay cuts, wage freezes and low paid part-time or zero hours contract work – find it impossible to live in any other way than through debt.

The report found that dependence on credit to pay for essentials like food and bills has increased significantly among the age group 35-44 year olds.

Nearly 20% of those surveyed in this age range were borrowing simply to make ends meet. Outside this age range, the group most seriously being hit by debt are students, with 46% of the increase in unsecured debt coming from student borrowing.

PwC estimate that graduates who started their courses after 2012 will leave with an average debt of £40,000-£50,000. This report, however, while exposing the amount of debt households are running up year-on-year, does not bring home the full enormity of the personal debt crisis.

This was spelt out in figures obtained from the Bank of England in February which showed that the overall amount of personal indebtedness stood at a massive £1.46 trillion – about the same size as the government’s national debt!

The simple fact is that in order just to survive, millions of workers and middle class people are being forced to resort to credit cards, bank loans and loan sharks just in order to pay for the essentials of life.

As such they are on the edge of being tipped over into the abyss by the slightest change in circumstance.

The only future capitalism can offer workers and young people today is a lifetime of poverty and debt servitude as the banks – which demand bail-outs for themselves – demand that these debts are paid in full.

The time has come to put an end to this debt-ridden capitalist system once and for all through the socialist revolution.