UK households might be piling on the debt, but average earnings are not keeping up. According to the ONS, average earnings including bonuses rose by 3.8 per cent in the year to December 2007. The comparable number for November was 4.0 percent. Public sector workers are doing particularly badly; their increase was just 3.3 percent.
With the retail price index rising at 4.1 percent, real wages in the UK are falling at the rate of about 0.3 percent a year.
Declining real incomes have not stopped UK households from spending. In the last three months of 2007, households put a further £32.4 billion on their credit cards, the second-highest amount in history.
So here we have it; debt is rising at double digit rates, while real incomes are falling. So how exactly will this new debt be repaid?