The Fox Report: The turning point?
Howard Reed dares to speculate on why debt is falling
In the last five years conventional wisdom regarding the UK economy has been turned on its head. The claim that the government had abolished ‘boom and bust’ was exploded in spectacular fashion by the crash of 2008 and the near-collapse of the financial system and subsequent bailouts. The assumption that families on middle incomes would share in increased prosperity from decade to decade, through rising earnings and house prices, has been challenged. At the same time there appears to have been a turning point in a less talked about economic statistic – household debt. What is driving the changing trend in debt and what are the implications? Bank of England statistics, all inflation adjusted to December 2012 prices, show that over the past twenty years secured lending, principally mortgage debt, and unsecured consumer credit, such as credit cards, store credit and personal loans, both rose gently during the 1990s. They then accelerated over the 2000s until the financial crash of 2008. Since then total debt has fallen from a peak of just over £1,600 billion to around £1,400 billion in real terms, and is still on a downward trajectory. It looks as if the crash of 2008 was a ‘turning point’.
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