Why are people in the UK so in debt?
A recent report has revealed that the UK is one of the most indebted countries in the world, with about £25,000 worth of debt for every citizen—or £1.7 trillion overall. This figure was worked out by calculating the UK’s debt-to-GDP ratio, which stands at 89%; a very large percentage that means we share the shame with only about 19 other countries.
This is, obviously, a lot of debt to deal with. The government may borrow and loan money all the time, but the UK people bear the weight of debt personally too.
So what’s the cause?
Student loans are on the rise
More and more of us are going through to higher education, and the days when the government gave you a grant to go are long gone. Instead, universities charge up to £9,000 a year per student, and there are indications that could be on the rise.
Although you don’t have to pay back student debt before you earn a certain level, if you’re a UK national, it means that a hefty chunk of change is being taken away from your paycheque in tax before it even gets to you.
Wages are stagnating, but the cost of living is going up
Chocolate bars that cost 35p a few years ago are now worth 60p. The price of milk is going up. It costs more to buy clothing and shoes. Unfortunately, wages are still pretty much what they when all these price rises happened. This means that it costs more and more for the basics, and there’s less to go spare. People might take out a loan for a holiday or Christmas, and struggle to pay it back if wages are squeezed even more.
We’ve forgotten what we’ve learned from 2008
After the crash of 2008, we promised ourselves that we would never let ourselves get into the mess again. However, that was not the case. More and more things seem ‘essential’ enough to put ourselves in debt for, but unfortunately, it’s taking more and more time to pay off any loans—which, in turn, means the interest increases.
Signs are pointing to another crash happening shortly, as the Bank of England has warned about it; Britain may soon find that its accolade of being one of the most indebted nations on earth will not be a good thing for its citizens.
Check out our previous blog on how Britain could be facing another debt crisis.