Britain Has Binged On Debt

Article by Abbi Rouse

In the past few years, Britains economy has become bloated as consumers have been bingeing on debt and failing to work off the excess, Reform has claimed.

According to the independent think tank, this tendency to rely on cheap credit cards and cheap loans to support spending habits has produced an economy that is unfit and working inefficiently. A new report from the group notes that it is not just consumer borrowing that has caused the countrys coffers to become corpulent with debt, as the public structural budget deficit has become the fourth highest of all countries in the Organisation for Economic Cooperation and Development. Meanwhile, Britains trade deficit is continuing to burgeon, while public spending programmes are based on out-of-date and over-optimistic forecasts for gross domestic product (GDP) growth, the group warned.

It warned that in the coming years, the average taxpaying family will pay around 4,000 pounds to rebalance the national debt, equivalent to 100 billion pounds in tax contributions every year. So too, it noted that this tax increase – amounting to 6.6 per cent of GDP – does not take into account the additional burden which will be borne by further fiscal stimulation packages.

Ahead of the pre-Budget report, which will be announced by Alistair Darling on Monday November 24th, Reform has warned that simply injecting more public money into the banking industry will have little lasting effect on the state of the countrys economy. So too, it warned, cutting public expenditure on vital long-term development programmes is equally ill-advised, as it claimed that as recent history has shown, cuts in spending will inevitably lead to increased investment a few years down the line.

Rather, the group insisted that there is only one course of action that will relieve the strain of the national debt: “In order to move beyond the obese economy, Britain has to consume less and work more. Households need a sense of direction towards a higher saving, lower tax economy. The short-term objective is the same as the long-term path to economic growth – to increase productivity. This should be the theme of the Pre-Budget Report and of Budget 2009.”

Furthering this, it called on the chancellor to focus on three key objectives when delivering his report: public sector reform, private sector productivity and personal productivity.

On the last note, the group insisted that individuals will be vital to economic recovery and as such, the government must provide support for people to help them to stop relying on personal loans and other forms of credit and start spending their own money.

For those who have seen their finances blown out to sea in the recent economic storm, taking out a debt consolidation loan may prove an effective way to get back on a firm footing monetarily. Meanwhile, the number of people who are in need of a debt consolidation loan may grow in the coming months as the independent financial advice site the Motley Fool warned that millions of Britons are unprepared for a recession.

About the Author

Abbi Rouse is Editor in Chief for All About Loans. Our visitors have access to cheap online loans of all types: From home improvement loans to bad credit debt consolidation loans.