American culture writing work

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The Boom in Everyday Borrowing

Introduction: £1.3 Trillion and Rising

In the closing months of 2004, fears about the scale of borrowing by individuals and households in the UK reached fever pitch in the main­ stream media. For the first time, the outstanding financial obligations of households grew to over £1 trillion. While the lion's share of the £1.05 trillion owed by UK households at the end of November was related to mortgage borrowing (£867 billion), it was the £58 billion owed to credit card companies and the further £125 billion of obligations arising from other unsecured consumer lending that especially attracted the media's attention (figures from FSA 2005: 57). It was highlighted, for example, that households in the UK account for roughly two-thirds of the outstanding credit card obligations of the entire European Union (Halligan 2005). The overall scale of UK household borrowing had not only reached new heights, but the gradual and relatively steady increases of the previous few decades had given way to rapid growth. The ratio of household's outstanding obligations to post-tax income increased from roughly 100 per cent to 150 per cent between the late 1990s and 2005 (Bank of England 2006a: 39). In 2004 alone, the annual growth rates for lending to UK households by the major UK banks were a staggering 25 per cent on credit cards, and 15 per cent for both unsecured consumer loans and mortgages. While these annual growth rates subsequently slowed to stand at between 6 per cent and 8 per cent for all categories of lending by the first half of 2006, the total outstanding financial obligations of UK households nevertheless reached in excess of £1.3 trillion (p. 25).

Individuals and households in the UK have, of course, been far from alone in their borrowing binge. As part of what he terms the 'global debt bomb', economic historian James Clayton (2000) traces, in quantitative

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