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Every day we are told via all media outputs how depressing the state of the economy is, how we are facing a double dip recession and how this is ultimately putting a squeeze on every single household’s level of income. Certainly most households in the UK will have felt the pinch be it through redundancies, pay freezes, pay cuts or utility bill increases. This is reflected in the amount of loan applications be it personal loans, payday loans or credit card applications which have increased every year since 2006. People need to borrow this money to simply live day to day. So do we know exactly how much debt our country is in apart from that it is a scary amount? Let’s have a look in more detail.
In January 2012 it was reported that the UK had the highest level of debt in the world apart from Japan. This translates as being more than 500% more than the national output which means it will take until 2020 for the UK to return to pre 2003 debts. This essentially means that the UK owes approximately £1 trillion of ‘net debt. If this was divided by every household in the UK then each would owe £138,360.
These figures however could actually be worse as they omit two very serious problems.
- The first is the cost of the unfunded public sector pensions estimated to be £800 billion.
- The second cost is debt from public projects such as the private finance initiative and the debts of national rail which equate to another £200 billion.
Reports produced in 2011 indicated that the US were paying off more debt per household than the UK. This was largely due to each household reducing debt from loans, mortgages, credit cards etc. However the reports showed that the UKs average household debt had actually increased.
There is some good news however as Britain has its own currency which means that it can choose to devalue the pound making the goods which they export cheaper to other countries, therefore more affordable and appealing. This could benefit the economy due to bigger tax receipts meaning there is more money to pay off the debts.
In summary, the UK will only begin to make a dent in its debt if households commit to reducing their debts. Currently people are borrowing their way out of debt instead of paying it off. This means that people need to make their squeezed incomes stretch further without borrowing money through credit cards, or loans.
Author Bio:- Laura Susstance is an experienced writer, mainly focusing on finances in the UK. She operates on a freelance basis as well as providing on page content for the “Fast payday loans review” blog.