The Institute for Fiscal Studies says that a large chunk of the £200bn debt held by UK households is manageableby Andrew Hood / February 8, 2018 / Leave a comment
Recent years have seen growing concern about the amount of unsecured debt held by UK households. On the Bank of England’s measure households now hold a total of over £200bn of this kind of debt—things like credit card debt, unsecured loans from banks, and car finance debt. Of course the total volume of the unsecured debt for households might have important implications for financial stability, as the Bank of England itself has noted. But knowing the total amount of household debt in the UK tells you very little about whether debt is a “problem,” or more generally what impact it is having on household living standards.
Often lost in the concerned reporting and discussions of unsecured debt is that taking on debt can be entirely appropriate and in fact raise households living standards. Consider an individual offered a job in the next town, but without the cash in hand to buy the car they need to get to the new office. Clearly, borrowing to buy the car could boost rather than harm their future living standards.