£109bn household debt bombshell to wipe out National Insurance tax cut

8 Mar 2024

Embargoed until 22.30 Saturday 9 March 2024

Debt interest costs to rise by average of £1,917 per household this year, double the amount before Liz Truss’s mini budget
The debt bombshell will be ten times higher than the government’s National Insurance rate cut
Lib Dems warn Budget was a “Conservative con” with households still paying the price for Liz Truss and Kwasi Kwarteng crashing the economy

Households will spend a staggering £109 billion this year servicing their debt, including mortgages and credit cards, double the figure before Liz Truss’s mini-budget.

Figures buried in the small print of the Budget reveal the enormous household debt bombshell, which is more than ten times the Government’s £10.1 billion cut to National Insurance rates.

It means the average household will spend £3,855 this year just servicing their debts, an extra £1,917 compared to the year before the mini-budget. The share of household disposable income being spent on debt servicing is set to reach 6%, the highest level since 2010.

The Liberal Democrats said it showed that the Budget was a “Conservative con”, as the soaring cost of mortgages and other forms of credit more than wipes out any benefit from the cut to National Insurance.

Separate forecasts from the Office for Budget Responsibility show that total mortgage interest payments are expected to rise by another 26.6% in 2024, having already doubled in the last two years.

Liberal Democrat Leader Ed Davey said:

“This Budget was nothing but a Conservative con, with a £109 billion household debt bombshell hidden in the small print.

“Families are still paying the price for Liz Truss and Kwasi Kwarteng’s failed experiment that crashed the economy and sent mortgages spiralling.

“Voters will not forgive this Conservative government for their economic vandalism.

“The country urgently needs a General Election so we can kick the Conservative Party out of power and repair the damage they’ve done to living standards and our public services.”

ENDS

Notes to Editor

OBR Mortgage/house prices forecast

Household debt servicing costs are forecast to total £108.7bn in 2024 – double what it was before Liz Truss’s mini-budget (£54.7bn Oct 2021-Sep 2022) [OBR, Economic and Fiscal Outlook, detailed forecast tables - economy, tab 1.18].
This means the average household will spend £3,855 this year just servicing its debts, an extra £1,917 compared to the year before the mini-budget (based on 28.2 million households, according to the ONS here)
6% of household disposable income is being spent on debt servicing costs, the highest since 2010 when it was 6.1% [OBR, Economic and Fiscal Outlook, detailed forecast tables - economy, tab 1.18].
The Office of Budget Responsibility (OBR) forecasts that mortgage interest payment will rise by 26.6% in 2024 (OBR, detailed forecast tables - economy, tab 1.7).