UK families are expected to run up £40bn of debt this year (1), as the UK Government has borrowed a further £66.9bn to date in the current financial year, despite pledges to move to a balanced budget (2).
The Office for National Statistics (ONS) released a summary of public sector finances from April to November 2015, showing that the government spent more money than it received in taxes and other income. £58bn was spent by central Government departments in November 2015, such as health education and defence – around a 3% increase in spending compared to the previous year (3).
The money owed by the Government stood at £1.5tn at the end of November 2015, equating to 80.5% of Gross Domestic Product (3).
The Labour Party fears millions of households would face “serious hardship” if interest rates rose, and the borrowing trend would decrease Britain’s chances of economic normalisation.
The most recent Office for Budget Responsibility (OBR) statistics disclosed that households have moved from a surplus of £67bn in 2010, to a £40bn deficit this year (1).
The OBR has predicted that government borrowing for the 2014-2015 fiscal year will be £68.9bn; although this excludes support for public sector banks and the new changes to the treatment of housing associations (2).
Sir Vince Cable, former Business Secretary, warned last month of the dangers of excessive household debt: “We’re back on the treadmill of growth being sustained by personal borrowing. Much of it is against an inflating housing stock. Taken together with other indicators like the very weak external deficit position, it suggests we’re getting back to the old and unhappily discredited forms of economic growth” (4).
Shadow Chief Secretary to the Treasury Seema Malhotra has said “Millions of families will face serious hardship if interest rates start to rise. Chancellor George Osborne is relying on millions of British families going further into debt to hit his growth targets” (5).
Leading economists are in doubt about the Chancellors aim to meet the OBR’s forecast for the current financial year.
(1) The Guardian. “Economy concerns as household debt rises to £40bn in latest figures”. theguardian.com
(2) The BBC. “Government borrowing worse than forecast in November”. bbc.co.uk
(3) ONS. “Summary of Public Sector Finances, November 2015”. ons.gov.uk
(4) The Independent. “Fears of new economic crash as British families run £40bn deficit”. independent.co.uk
(5) Yahoo. “Warning as families head for £40bn debt”. uk.finance.yahoo.com