23.08.16
Pay freeze and wage cap forcing public sector workers into debt, claim unions
UK households are increasingly in debt because of a real-terms decrease in wages, especially for public sector workers, the TUC has said.
New research from the TUC shows that total unsecured debt for UK households (including credit cards, payday loans and student loans, but excluding mortgages), has risen from £48bn in 2012 to £353bn in 2015.
The TUC said that households are being forced to borrow money “almost by default” because of a real-terms decrease in wages, linked to the public sector pay freeze and a lack of infrastructure spending.
Responding to the survey, Dave Prentis, general secretary of Unison, said: “Many of those affected by debt will be public service workers who have suffered eight years of zero pay rises, followed by a government imposed cap on earnings.
“This report rightly draws a link between increased debt and stagnant wage growth at a time when rent and transport costs continue to rise. Many families are having to make choices between paying the rent and feeding their kids.”
Unison recently accepted a pay deal for council workers in which most will see their wages increase by 1% over two years.
A recent report from the Chartered Institute of Personnel and Development found that public sector pay is failing to keep up with the cost of living.
In total, 3.2 million, or one in eight, households are in ‘problem debt’, where more than 25% of their income is spent on unsecured debt, and 1.6 million are in ‘extreme problem debt’, with more than 40% of their income spent on debt.
The issue affects low-income families the worst, with 1.2 million of the extreme problem debt households on an income below £30,000 a year.
The report warns that conventional measures of household debt, which show it to be at a record low, are unreliable because they do not factor in other necessary costs for households beside debt.
It also said that “the financial pressures on households are likely to increase” as the UK’s vote to leave the European Union causes a fall in the value of the pound and a rise in imported goods and services.
The TUC said that the government should improve its measures of household debt and establish an official target for reducing the burden.
It also recommended that as well as promoting employment, the government should identify the groups of debtors who are most at risk, and consider making it easier to grant Debt Relief Orders.
Frances O’Grady, general secretary of the TUC, said: “Higher wages must be at the heart of the government’s economic plan. We need a return to proper year-on-year pay rises, and a higher national minimum wage.”
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