Office of Budget Responsibility

Kennyboy66

Here is something that has puzzled me for a while.

The OBR forecasts that houshold debt will rise from £1560 billion in 2010 to £2126 billion in 2015 (they use end of calender year).

The credit action stats are not quite the same (£1452 billion at Dec 2010), but bearing in mind there has been small growth in the credit action figures (£1409 billion Dec 2007) in the last 3 years (in fact all the increase was in 2008, the numbers have actually fallen in 2009-2011 so far), why should anyone think that;

a) its likely to happen.
b) its desirable.


http://budgetresponsibility.independent.gov.uk/wordpress/docs/household%20debt%20paper%20formatted.doc1.pdf

http://creditaction.com/helpful-resources/debt-statistics/2008.html

Loughton_Monkey

It's difficult to understand how they 'forecast' this and where they get their figures from.

Amongst UK Households, there must be a rapidly growing proportion of retiring household. Like me. Now I have a 'consumption' of roughly 250% of household 'income' [pensions] as I continue to (a) await further pensions to start payment, and (b) continue to spend from own resources. Does my 150% 'extra' go down as being 'borrowed'?

Personally, I think the only figures that make real sense would be unsecured lending. Secured lending [mainly mortgages] is relatively harmless to the economy and to the households concerned. Unsecured lending is where the 'problems' are.

chewmylegoff

i started reading the OBR report, but i got a bit baffled when it started talking about people borrowing in order to increase their financial assets, which it defined as savings accounts, pension contributions and shares. thinking about that, maybe i should borrow a lot of money and put it in my pension, then declare myself bankrupt...

perhaps all the report's aggregated figures, which show increased household borrowing and increased household financial assets (increasing by a greater nominal amount than borrowing), actually indicate that the poor are going to get poorer and the rich are going to get richer.

Thrugelmir

chewmylegoff wrote: »

actually indicate that the poor are going to get poorer and the rich are going to get richer.

Seems to have been the trend over the past 10 years at an accelerated rate,

Generali

Kennyboy66 wrote: »

Here is something that has puzzled me for a while.

The OBR forecasts that houshold debt will rise from £1560 billion in 2010 to £2126 billion in 2015 (they use end of calender year).

The credit action stats are not quite the same (£1452 billion at Dec 2010), but bearing in mind there has been small growth in the credit action figures (£1409 billion Dec 2007) in the last 3 years (in fact all the increase was in 2008, the numbers have actually fallen in 2009-2011 so far), why should anyone think that;

a) its likely to happen.
b) its desirable.

That's a nominal (ie not inflation adjusted) increase of 6% pa. With RPI at about 5% it means debt barely rising if you do adjust for inflation.

My opinion is that we're seeing the start of 'deleveraging', that is households reducing their debt either because they don't want to borrow or because banks won't lend to them. As a result I don't think the above scenario is likely however if you do the sums then it is quite plausible.

Would this be desirable?

I guess it depends what you do for a living. If you sell things on credit then it's great. If you think that all debt leads to servitude and moral laxity then it's probably not so great, unless you enjoy moral laxity in others of course.

I was quite a fan of moral laxity in my single days. Now as a responsible father I am not allowed to be.