Household debt is set to reach record highs during the first year of the new government, analysis shows.
The Trade Union Congress (TUC) says unsecured debt - including credit cards and payday loans - will reach £13,900 per household in 2017, with charities blaming ‘stagnant wages’ for the problem.
The average level is expected to increase by £700 on last year - the highest recorded since the financial crisis - and could exceed £15,000 before the end of the next parliament.
The TUC said the rise reflects the UK’s ‘ongoing living standards crisis’, with wages in the UK worth around £20 per week less than before the economic crash a decade ago.
General secretary Frances O’Grady said: “The surge in household debt is putting the economy in the danger zone.
“We’ve got this problem because wages haven’t recovered. Credit cards and payday loans are helping to prop up household spending for now, but millions of families are running on empty.
“The next government must act urgently to deliver the higher wages Britain needs for sustainable growth. They must boost the minimum wage, and end pay restrictions for public servants like nurses, firefighters and midwives.
“A lot more government support is needed for the parts of Britain where well-paid jobs are in short supply. Communities that lack good jobs today could thrive tomorrow if they get proper investment in training, transport links, broadband and decent housing.”
Figures show County Court debt judgments against consumers have risen by 35% across England and Wales, and the Bank of England is investigating concerns about unsecured lending to households.
Mike O’Connor, chief executive of debt charity StepChange, said: “What the TUC describes is consistent with what we are seeing. We are also seeing levels of unsecured debt rising for the first time since 2008 and the prospects are worrying.”
The charity said based on April 2017 data, it estimates 8.8 million people turned to credit to pay for everyday household expenses in the last year.
Of these, more than half were in employment and 41% were in full-time work.
Mr O’Connor said: “We welcome Labour and Conservative manifesto commitments to introduce a ‘Breathing Space’ scheme to help people manage serious debt problems.
“In addition to better protections for people in debt, the next government should commit to action to help the 2.9 million people already struggling with severe problems and help over 9 million who are showing signs of financial distress.
“It should also work to ensure better alternatives to dangerous forms of high-cost credit and it should act to help families build up savings to insulate them from problem debt.”
The full forecast, which is based on ONS data and OBR projections, is below:
Unsecured debt per UK household
Debt per household