Financial advisers Hargreaves Lansdown reported this morning that:
- Households with unsecured debts (like credit cards and loans) spend an average of £216 a month on them.
- In debt hotspots, almost 20% of income is being spent on repaying unsecured debts.
- Excluding student loans and mortgages, borrowers owe an average of £2,687, but in the most debt-laden area of the country, this rises to over £5,535.
- The more we earn, the more we owe – so households of the top fifth of earners have an average of £4,860.
- Bank of England figures released last week showed we owed £233.4 billion in consumer credit like overdrafts and cards in December – up £1 billion in a month.
- The annual growth rate for all consumer credit is 6.5%, and for credit cards is 8.1%.
The implication is obvious: unsecured debt in the UK is growing faster than people's capacity to service it. That's due to low incomes, growing poverty, and the government's lack of willingness to control prices in key areas within its control.
The consequence of that growth is obvious. A debt crisis is in the making.
It is not a public debt crisis: public debt is not an issue in the UK, and it could not be at any current likely level of debt.
However, Rachel Reeves' desire to transfer the supposed £22 billion onto the private sector has an inevitable outcome. It is that individuals rather than the government are forced to borrow. The result is that affordable public debt becomes unaffordable private debt. and those least able to bear the costs are pushed towards financial ruin.
Rachel Reeves chose to do this. She did not need to, but she opted for it. When this debt storm breaks, as it will, she will need to be reminded of this.
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It is poorly reported but the personal trauma (and it really has been trauma for many) caused by the Barclays bank fiasco on Friday through to Sunday shows how little resilience many people have in their finances.
Agreed
Have you not sent Rachel Reeves your e-book, Richard?
She needs an upgrade to her mother’s kitchen table.
I think we can be sure she would not read it
Similar story in the US (you commented on it a couple of weeks ago)…. and we wonder why those struggling are unhappy with democracy?
On a (very minor) technical note. If you pay off your card each month in full you will still be counted in these numbers. If you spend £1000 a month then on average, your credit balance will be £500. So, increased card use (instead of cash or debit cards) could explain some increase.
I would like to see “interest income” for card issuers – that is the key number…. as well as how it is distributed among their customers. THAT would give us a real picture of how card debt is draining the resources of so many struggling people.
Thanks
And credit cards often incentivise using them for all purchases by giving rewards in the form of cash-back, air-miles, etc. which will push up the apparent use of credit even when it’s not really needed.
I only use one for buyer protection – and always clear the card every month
I think we should give democracy a try before people get unhappy with it!
Thank you, Clive.
A decade ago, colleagues and I discussed that at the blue eagle’s nest, a well known issuer, and wondered why the authorities did not collect.
We also asked about such debt to fund day to day living, unexpected bills, healthcare.
Don’t get me started on Council tax debt
Do we have any figures for distribution IE what have the people who have borrowed got outstanding
But Sir “Freebie” Starmer likes to put himself in debt to others so why wouldn’t he support “Leech Capitalism” (rentierism?
I would assume that the core of unsecured and unpaid debt on credit cards, cannot be changed to secured debt, as we have only stopped forthcoming Tory austerity, and the new Trade war reduces the desire for lenders to shift to secured debt.
That appears to leave the options of devaluation, and/or significantly shifting front existing austerity to resilience.
Scottish Lab have stated unequivocally that austerity has been ended by UK Lab, so that leaves devaluation, with all it’s warts?
Why?
Why not default?
I was assuming that defaults on unsecured debt, meant that the interest rates would become commercially unsustainable, and aside from defaults, and new bank led austerity would follow.
The only way out would be for more money in pockets, which requires more trade, which might mean not only QE but devaluation.
Not one of those measures lack pain on different sectors, but on balance would the USD/GBP rate of 10 to 14 years ago generally be of assistance?
I do not think that follows
But who knows if the instability is serious?
I susoect it will, howver, be disatrous at a micro and not macro level
Does the figure for unsecured debt include car leasing by individuals?
If not, it would add substantially to that figure.
Most care debt is on leases i.e. it is secured
Hello Dr Murphy,
How can I share your point with the reporters that UK private debt is relatively low, both as a fraction of GDP and as a fraction of income?
– https://commonslibrary.parliament.uk/research-briefings/sn02885/
– https://www.ceicdata.com/en/indicator/united-kingdom/private-debt–of-nominal-gdp
Credit card debts also don’t seem to be exceptional
– https://www.statista.com/statistics/286416/united-kingdom-uk-outstanding-balance-value-on-credit-cards/
Not do Insolvencies
– https://www.statista.com/statistics/310706/uk-insolvencies-individual-insolvencies-by-type/
Best wishes
I didn’t ask you to
I am not even sure what you are trying to do
Maxwell takes my breath a way.
How bad does it have to get before it is not considered normal anymore?
The way he/she talks its as if there is more capacity for debt and that that is a good thing!
This sounds like a @ProfSteveKeen moment 🙂
” the government’s lack of willingness to control prices in key areas within its control.”
Interest is of course a key factor in private debt. As you have addressed several times, the Govt’s failure to control the Bank of England’s interest rate policy is relevant. This opinion piece by Philip Inman in the Guardian yesterday includes “What most economists agree is that interest rates are punishing the economy and are too high.” and “Bailey and his colleagues on the monetary policy committee (MPC) are considering whether a slowdown in economic growth is going to persist – and whether they may be to blame.”. And “Truss has subsequently said that she would have sacked Bailey, but his eight-year contract, and the “deep state”, made that impossible.” plus “But attention could switch to the central bank should interest rates in the UK, which are the highest in the G7….”
https://www.theguardian.com/business/2025/feb/02/pressure-rises-on-bank-of-england-and-the-fed-as-the-interest-rate-debate-gets-political
I agree with Phillip. That is not always the case.
Whatever happened to the Mile End Economists? And that alliance with Steve Keen?
Too much work to finish, on all fronts. As easily explained as that.
I wonder whether Musk has understood MMT?
https://x.com/elonmusk/status/1886451951925141781
I don’t think so.
That is anti-government rhetoric.
I can see that unsecured private debt (and, indeed, secured private debt) is a huge issue for many who cannot service their debts and pay for essentials. There are also, though, quite a large number of people with no savings and no identified debt because they cannot get credit. So borrow from friends, family, loan sharks, wherever they can find any money, in order to pay for most, or some, essentials. Or they shoplift. They will, soon, be joined by those who cannot service their debts.
It almost seems as if they are an underclass, ignored and forgotten.
They are a underclass Labour wants to deny, in every way.
The rich are in denial and Sir “Freebie” so desperately wants to serve them. Accordingly he is completely untrustworthy!
You hit the nail on the head. Although I’m not sure they are forgotten. I’m not sure they are even thought of to start with, let alone forgotten.
Maybe Liz Kendall gets her ideas about poverty from Ch5 “poverty porn” about “feckless drug-addled benefit scroungers”, and doesn’t spend time listening to real people?
One of the first things people learn as they face chronic long term poverty, is how to prioritise their debts.
First – mortgage or rent, because you don’t want to lose your home.
Second, council tax, because its a criminal matter to default on that.
Third, your car payment, so you can get to work, and no other creditor or bailiff can touch your leased car, as it isn’t yours (although they may try – personal experience).
Loan shark needs prioritising, because they won’t take no for an answer.
Phone costs can be cut down drastically with good advice.
Water bill is a low priority, because it’s difficult for the company to cut you off.
Electric & gas will often be on pre-pay meters, so “self-disconnection” occurs, and isn’t monitored or visible. (It also means no hot or cooked food, or hot water or heating, or laundry so the kids begin to smell, so even if you DO have a slo-cooker you can’t use it). Schools do an amazing job here, often unnoticed and unfinanced.
“Discretionary” spending, on “luxuries” like food, nappies & baby formula, clothing, school uniform, children’s shoes, adult prescription fees, and fuel/tickets for travel to work, need actual cash or charity or theft so are v vulnerable.
Hopefully your appliances don’t break down.
Things that don’t appear on the national statistics – utility self-disconnects, missed meals, loan sharks, missed prescriptions, use of charity (food, clothing, toys, baby gear, warm spaces, food clubs, free meals), borrowing from friends/family.
Figures are available from charities about the value of their input into the domestic economy, which go some way to measuring the scale of the crisis, although charities are now struggling to do all this because of:
Increased demand (15 yrs worth)
Increased costs (incl their employment costs imposed by Rachel from accounts – NI & mimimum wage)
Decreased grants (esp. from councils)
Decreased donations from public & businesses
Less waste food to recycle, as local food businesses close down.
But don’t worry, the 3rd runway at Heathrow will solve everything, once we’ve got the whisky & salmon on its way, and GROWTH has arrived….