Number of families with problem debt up by more than a quarter since 2012, new report reveals

The number of households with problem debt has increased by 700,000 (28 per cent) since 2012, according to new TUC and UNISON-commissioned research published today (Tuesday).


The report, Britain in the Red, shows that in 2014 one in eight households (3.2 million) were over-indebted compared to one in ten (2.5 million) in 2012.


The report shows that young people, the self-employed and low-income families have been the hardest hit by the rise in problem debt. Problem debt is defined as having to spend 25 per cent or more of monthly gross income on unsecured debt repayments (credit card debts, loans and overdrafts) that are not mortgage or rent payments.


Britain in the Red also finds that half (1.6 million) of those with problem debt spend 40 per cent of their gross income on debt repayments that are not housing costs. Lower-income households account for the great majority (1.1 million) of this number.


The report reveals:

  • In 2012 just 2 per cent of 18-34 year-olds with any form of unsecured borrowing were over-indebted, but by 2014 this had risen to 10 per cent. Credit card, personal and payday loans, overdrafts and store cards were the main factor behind the increase in problem debt not student loans.
  • In 2012, 6 per cent of self-employed workers with credit commitments were in serious debt. But by 2014 this had nearly tripled to 17 per cent.
  • The number of low-income families with problem debt shot up from 9 per cent in 2012 to 16 per cent in 2014.
  • People who took out pay day loans in 2014 spent, on average, 30 per cent of their income repaying them – up from 12 per cent in 2012.
  • In 2014 households with store cards spent 21 per cent of their income repaying them – up from 9 per cent in 2012.


The TUC and UNISON say the report reveals how economic growth has failed to reduce the burden of debt repayments for many families and that wage stagnation has left an increasing proportion of households having to borrow more than they can afford to get through each month.


The TUC and UNISON fear this burden will get worse if we see early rises in interest rates.


The Bank of England identified the consumer debt boom prior to 2007 as one of the causes of the financial crisis and subsequent recession, and has also suggested that household debt has held back the recovery since.


Although households overall borrowed less, and paid back more after the crisis, debt-to-income ratios have remained very high as a result of real wages falling between 2007 and 2014 – the longest fall in living standards since records began in the 1850s. The analysis also shows that despite this small fall in overall debt-to-income ratios the proportion of households with problem levels of unsecured debt repayments is rocketing.


TUC General Secretary Frances O’Grady said: “Rising household debt is not the sign of a healthy economy. People raiding their piggy banks and borrowing more than they can afford is what helped drive the last financial crash.


“The fact that more and more are getting into problem debt is particularly worrying given the prospect of interest rates going up.


“We need a wages-led recovery that works for everyone not another debt-fuelled bubble.”


UNISON General Secretary Dave Prentis said: “The last few years have been tough ones for many working families, who have racked up huge debts just trying to get by. The living standards crisis has left a huge hole in household finances.

“Wages might finally be picking up for those in the private sector, but anyone working in health, education, local government and our other public services still has many more years of pay restraint to survive. And soon to be introduced cuts to tax credits will push many low-income families yet deeper into debt.

“It is going to take many years for families to get back on an even keel. People having to rely on their credit cards, friends and family, or pay day loans just to get through the month is not a sustainable route for our economy.”



Over-indebtedness amongst selected household types 2012 & 2014

2012 2014
All households 9% 12%
Households with any form of unsecured debt 18% 25%
Of households with unsecured debts:
Working households 3% 10%
Low income households (<£30K) 9% 16%
Younger workers (18 – 34) 2% 10%
Older Workers (55 – 64) 6% 9%
Self employed 6% 17%
Long-term sick/ disabled 13% 19%
Private renters 4% 12%
Buying with a mortgage 3% 10%

Source: Britain in the Red

– A copy of Britain in the Red can be found at:

– The over-indebtedness figures are based on figures for debt repayment against income taken from the Bank of England’s NMG survey of households (2012 – 2014) and the YouGov DebtTrack survey commissioned by the Department of Business, Innovation and Skills (2012).  The NMG survey contained a sample of 6,000 households in 2014.  The YouGov DebtTrack survey contained a sample of 8,000 households in 2012. These data are regularly used for analyses of mortgage payments; less work has been done on the unsecured borrowing results, but the data are made publicly available by the Bank of England.

-The total number of over-indebted households is calculated by using findings from the NMG survey from 2012 to 2014 to update the baseline position obtained from the YouGov DebtTrack survey conducted in 2012.  This method is adopted because the NMG survey under-reports levels of unsecured debt but is considered an accurate measure of changes in the distribution of debt over the period.

The percentages of debtor households within specific household types are from the NMG survey only due to the lack of a detailed baseline for these within the YouGov survey.  They are therefore likely to be conservative estimates.