Britain in the red

We always had an idea that the British public’s attitude to its own finances was rather free and easy. Things are, however, even worse than we thought. The total stock of consumer debt owed by British families is now, for the first time ever, greater than the country’s GDP. In other words we owe more money than the entire economy can generate in a year. Those who can remember the scrimping and saving of the austere post-war years may well greet the news by nodding ‘I told you so’ and patting their bulging mattress.

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Last Updated: 31 Aug 2010

Bank of England figures put Britain's consumer debt at £1,345bn – higher than the size of Britain's annual output of £1,330bn. According to the National Institute of Economic and Social Research, the ratio of household debt to personal income is 1.62 in the UK, compared with 1.42 in the US, 1.36 in Japan and 1.09 in Germany.

Much blame surely has to fall to the ‘buy now, pay later’ culture that pervades the nation. Students are graduating with debts of around £15k to £20k, at which point they emerge into a world of glittering overdrafts and tempting loan offers, and where things as insane as the 50-year mortgage are being mooted. In this climate, the very idea of actually saving for anything is as old-fashioned as black-and-white TV or eating round the dinner table.

Does it matter? As long as everyone keeps spending, and the economy keeps growing, then probably not. But if you look at the subprime crisis in the US, which came as a result of allowing people to get mortgages without even having to prove how much they earn, there’s definitely a strong argument for cutting up the credit card and dusting off the piggy bank.

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