It will take average-income families until next June to pay off their Christmas debts, according to new analysis published by the TUC today (Friday).
The analysis shows how falling real wages and lower household savings will make it harder for borrowers to repay their credit cards and loans in 2014.
Last Christmas, one in six families borrowed money to pay for food, drinks and presents, with households borrowing an average of £654 per adult (Men £1,000, women £547). Using average weekly earnings and savings data the TUC estimated that it took average-income earners 20 weeks to pay off this debt.
This year, consumer debt has increased by 4.9 per cent. The TUC estimates this will lead to average debts of £685 per adult this Christmas. With real wages and savings lower than last year the TUC calculates it will therefore take 24 weeks for an average-income earner to pay back this money.
However, if a minimum wage worker were to borrow this sum it would take them an entire year working full-time to pay it off.
Research published by Consumer Intelligence in October showed that nearly half of all families who borrowed during last year’s festive season still haven’t finished repaying this money.
The TUC says the findings underline once again how ordinary people are not benefiting from the recovery and are instead facing a bigger struggle to pay off their debts.
British workers are currently suffering the longest real-wage squeeze since the 1870s, with inflation rising faster than wages for the last 42 months. With real wage growth forecast to be weak for the next four years, the government needs to make fairer pay rewards a priority, says the TUC.
TUC General Secretary Frances O’Grady said: “Britain’s real-wage squeeze is forcing more and more families to put Christmas on credit.
“Millions of households will be still be paying for this year’s presents, food and drink well into the summer and beyond.
“Instead of benefiting from Britain’s economic recovery ordinary people are finding it harder to pay off their debts.
“Unless the government does more to tackle the cost of living crisis this debt bubble will continue to grow. Britain needs a pay rise.”