Theresa May’s achievement is turning debt into a national crisis

Posted on

Having posted one item on the suffering of low income UK this morning, let me continue the theme. This comes from Geoff Tily at the TUC this morning:

Let’s put the performance of household budgets since Theresa May became Prime Minister in July 2016 into context.

We can see from the following chart that in every quarter since July 2016, household outgoings have outstripped income (2016Q4 to 2017Q1):

chart showing household sector budget shortfall per quarter since 1987
Source: ONS net lending/borrowing for household sector 

The total shortfall is £34bn across all households — an average of £1250 per household.

And the annual shortfall for 2017 of £900 per household was also the first for 30 years. As the ONS has pointed out, even in the run-up to the 2008 financial crisis — an era of 100% (or more) mortgages — we never reached a point when the average household was a net borrower.

Theresa May has achieved the extraordinary feat of turning UK households into deficit borrowers.

Which for those who understand the sectoral balances is no surprise. If the government was to improve its deficit position then someone had to borrow. It turned out inconsequential national debt, which is affordable and never need be repaid, has now become deeply consequential and crippling household debt, which is what caused the 2008 crisis. As macroeconomic failures go this one is at the appalling end of the scale.