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More than 4 million fear they`ll be made redundant Consumers took on more mortgage debt in July Debts called in by parents Teenagers `scared of debt` Rising household costs could pressure people in debt Pensions debt may impact workers` retirement funds Welsh young adults `at highest risk of debt problems` Over 50s can`t afford to enjoy retirement because of debts Budget: tackling the nation`s debt Short-term debt: `no need for price control` The cost of clearing debt Education debt Tackling the national debt Number of mortgage deals on offer exceeds 3,000 Almost 5 million take on debt to pay household bills OECD: household debt more than 120% of disposable income Petrol price falls help people in debt Amount of mortgage debt taken on at lowest level in ten years Northern Ireland sees significant IVA rise Overdraft debt `becoming more expensive`

Are `Scrooges` slowing recovery by paying off debt?

08/10/2009

As they focus on repaying their debts, are Britain`s `Scrooges` slowing the economic recovery by spending less in the shops? It`s a question asked by businessweek.com, among others.

`For years,` the article states, `economists have felt that British consumers - who have the world`s highest debt levels relative to discretionary income (more than one-third higher than Americans`) - should rein in spending.`

Today, it seems this is happening. Figures from the Bank of England reveal that individuals` collective debt actually fell in July, for the first time since records began in 1993. Overall debt levels fell by £600 million, made up of £400 million of secured debt and £200 million of unsecured debt.

However, while this focus on paying off debt is good for individuals` financial health, it can be bad for the economy as a whole. It`s something the Bank of England refers to in its Quarterly Bulletin (Q3 2009):

`Any adjustment in saving is likely to have important consequences for the economic outlook, given the importance of household spending within aggregate demand. Indeed, any attempt to reduce consumption is likely to push down on output and hence household incomes. That could actually make it harder for households to increase their saving - an effect known as the paradox of thrift.`

Nonetheless, this should be a good thing in the long term, the article concludes, quoting Jamie Dannhauser, economist at London`s Lombard Street Research. Mr Dannhauser says that in the near term: "the adjustment to less debt will be severe", even though it`s "exactly what Britain has to do".

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More than 4 million fear they`ll be made redundant 16/12/2010 - According to R3`s quarterly personal debt tracker, more than 4 Consumers took on more mortgage debt in July 26/08/2010 - Consumers took on £2bn more mortgage debt than they repaid Debts called in by parents 26/08/2010 - According to research, `the bank of Mum and Dad` is Teenagers `scared of debt` 19/08/2010 - Nearly two thirds of teenagers are `scared` of debt, according