There have been a number of stories in the press this week regarding the rising levels of household debt in the UK and The Guardian has produced a useful tool showing the levels of debt by area, the units used are large but Crawley is amongst the most indebted areas in the UK.
While the combined Government/media narrative after the 2010 General Election focused all attention on the rising levels of government debt which are characteristic of every country in a recession, as higher unemployment and stagnant pay mean rising social security costs and diminishing tax receipts, it was the unsustainable level of household debt which lay at the centre of the 2008 crash.
Worse still, these figures don’t even include the level of debt residents owe in the form of mortgages, the main source of debt involved in the crash. That debt is on the rise is deeply worrying and yet unsurprising, as rising inflation eats into largely stagnant household income and the ongoing severe housing shortage ensures that housing costs consume an increasing proportion of people’s pay packet, which due to the nature of the housing market means that essentially young people on lower incomes are providing even bigger income boost to older people on higher incomes.
Clearly, there’s a social injustice to all of this, but beyond that if economic history has taught us one thing over and over it is that the more you rely upon cheap consumer credit to provide economic growth, the bigger the problem when the economy starts to falter. This hasn’t been helped by the Tories’ faffing around over the last seven years, producing a Government with high levels of National Debt (a very different proposition to household debt) without any of the positive economic stimulus the Brown Government had used debt to start to deliver by May 2010, means that the Government may well be too weak to intervene in the economy should we see another 2008-style crash on the horizon, something these figures suggest is a real risk. While National Debt is rarely a problem for households, household debt is certainly a problem for the nation.