Taken collectively, UK households spent more than they earned in 2017. It is the first time that household have ‘lived beyond their means’ in this way for almost thirty years.
The data from the Office for National Statistics (ONS) shows that British households have been supporting spending by taking on debt and dipping into savings, with potentially harmful consequences for the national economy.
This means that the average household spent or invested around £900 more than they received in income in 2017.
Even in the run-up to the financial crisis of 2008 and 2009, when 100% mortgages were on offer to home buyers, the country did not reach a point where the average household was a net borrower.
The last time this figure was in the red was in 1988 when the deficit was a more manageable £394 million.
Part of the household budget shortfall has been financed with increased borrowing. ONS figures show that households took out nearly £80 billion in loans last year.
They also deposited just £37 billion in bank savings, the lowest figure since 2011.
The above figures relate to the average household’s finances, but in reality it is the poorest households that are feeling the pinch.
The ONS says that the poorest 10% of homes are most at risk, spending two-and-a-half times their disposable on average in 2017. The richest 10%, meanwhile, spent less than half of their available income last year.
A committee of MPs recently called for greater support to help UK households that are struggling financially.
Members of the Treasury Committee called for more help to help people deal with debt and new measures to encourage people to save for a rainy day.
Their report also highlighted the debt collection practices of public authorities, described as the ‘worst in class’. Many public authorities, they said, were too quick to involve bailiffs which can put vulnerable people into more financial difficulty.
Citizens Advice said it had seen a 25% rise in bailiff problems since 2014 and had helped 42,000 people with 98,000 issues last year.
If you are struggling with problem debt, speak to one of our advisers today about a personal debt solution. Call: 0800 611 8888.