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Record high for family debt shows that we don’t have a recovery that works for all, says TUC

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New analysis published today (Friday) by the TUC shows that household debt is rising again, with total unsecured debt reaching a new high.

Total unsecured debt (including consumer credit and student loans, but excluding mortgages) rose to £319bn in the third quarter of 2015 – a record high, and well above the £290bn peak in 2008 ahead of the financial crisis.

The TUC analysis finds that unsecured debt as a share of household income is now 26.5% – the highest it’s been for five years.

The analysis also finds that unsecured debt per household rose to £11,800 in the third quarter of 2015, which is up £600 on a year earlier. On this per household measure, debt has never been higher.

Earlier this week the Bank of England published an analysis showing that household borrowing surged in the run up to Christmas. The monthly cash rise in consumer credit for November 2015 was the highest since February 2008.

However, the TUC warns that there is a much bigger problem than just ‘Christmas on credit’. The analysis published today follows the recent forecast by the Office for Budgetary Responsibility that UK household spending was set to be £40bn in deficit for 2015 – the highest on record. And the Bank of England’s Chief Economist Andy Haldane recently told the Treasury Select Committee that consumer credit is “picking up at a rate of knots”.

The TUC says that the growth of consumer credit should worry the government as a signal that fundamental problems with the economy have not been fixed.

TUC General Secretary Frances O’Grady said: “Rising household debt signals that too many people are still struggling to make ends meet. With pay growth slowing, and households facing a lost decade on wages, it’s no surprise that more families are relying on borrowing to meet the costs of day-to-day essentials.

“Although employment has risen, wages are still worth less today than eight years ago. This has left families struggling to meet the rising cost of living. We need a recovery where families can afford to pay their bills and raise their children without relying on credit cards and payday loans.

“The government must do more to increase job security, with the hours and pay that people need to get by. Otherwise we’ll be heading back to the same problems that led to the last financial crash. Ministers should lead by example and bring an end to years of real-terms public sector pay cuts.”

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