Spiralling debt

As society benefits from continual progress in science and technology and other advances, the idea that you would be materially better off than your parents – and that your children would be better off than you – was an accepted truth that’s been taken for granted.

 
Now, however, things are about to change.

 
A survey published yesterday revealed the extent of parents’ anxiety about their children’s future economic prospects.

 
Of the 1,100 UK parents polled, 75 per cent believed that their children would need more financial support in early adulthood than they did themselves, after accounting for rising tuition fees, rising living costs and property inflation.

 
Over a third said they expected to help with their children’s first house deposit and just over a third also said that they would continue to provide financial support to their children after they finished their education.

 
And parents’ worries over their children’s financial futures are borne out by fact.

 
Explosion in borrowing

 
Citizens’ Advice reported last month an “explosion” in borrowing among young people, with the number of people aged 17 to 24 coming to the bureau for debt advice skyrocketing by more than 20 per cent in the year to June.

 
Their data showed that the average young person had accumulated more than ÂŁ12,000 in unsecured debt by the end of 2012, which amounted to 200 per cent more than before the financial crisis.

 
Citizens’ Advice also highlighted that the average young person’s debt to income ratio is 70 per cent. This means that for every £10 that a person between 17 and 24 earns, a jaw-dropping £7 is spent repaying debts.

 
While the rise in debt among young people has mostly come from climbing tuition fees, pay day and bank loans are becoming a bigger and bigger part of the problem.

 
Citizens’ Advice findings mirror another report from PricewaterhouseCoopers (PwC) earlier this year, which found that the average UK household will have £10,000 in unsecured debt by the end of next year. The total amount of unsecured debt rose by 9 per cent last year to an all-time high of £239bn.

 
Carl Packman, who has written two books about payday loans, argues that the growing debt mountain facing Britons, young ones in particular, shows just how far we are from what chancellor George Osborne has hailed an economic recovery.

 
“While the line is that the British economy is ‘motoring ahead’, albeit not as fast as last year because of the Eurozone/emerging market drag, with personal debt forecasts as they are, the house of Great Britain is mostly built on sand,” Packman noted today on Left Foot Forward.

 
“As the country tries to improve productivity levels, indebted populations become distracted at work,” he continued, citing a study that found more and more people spend hours thinking about debt while on the job.

 
“As the cost of living becomes higher, we take on more debt in full knowledge that a pay rise is not forthcoming,” he added. “The next generation of employees will leave university (if they choose to go) with not just student debt, but dangerously high levels of consumer debt and the average Briton will owe £10k by 2016.

 
Breathtaking

 
“It’s breathtaking that anyone would think this is progress.”

 
Unite assistant general secretary Steve Turner also highlighted that growing levels of personal debt, especially among young people, belied the notion that a miraculous economic recovery was underway.

 
“Young people know better than anyone that this so-called economic recovery is little more than a sham. They are the ones most cruelly attacked by this government,” he said. “They’re being forced into insecure, low wage work with few prospects while being kicked out of their homes and into poverty with cuts to welfare support. As a further, discriminatory kick in the teeth, those under 25 are not deemed worthy of a higher level National Minimum Wage while those under 21 are paid less still.

 
“Unemployment may have gone down but the vast majority of young people just getting on the job ladder face insecure, short or zero-hours contracts on low pay and with little opportunity to progress.”

 
“One first step in restoring hope and inclusion to young people is making the voluntary Living Wage a compulsory one and raising it to ÂŁ10 an hour now and still further, as Osbourne’s attack on tax credits cuts still further into people’s earnings,” he added. “Businesses, many of whom happily exploit young people in the most disgraceful way can well afford to pay up.”