The coming private debt crisis will be Rachel Reeves’ fault

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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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