The UK has a consumer debt crisis and it is young people, aged 18 to 34, who are most vulnerable. National unsecured debt – which includes credit cards, overdrafts and car loans – has topped £200 billion for the first time since the global financial crisis struck in 2008. But the concentration of debt, and the experiences of vulnerability, are not shared out equally.
Andrew Bailey, the head of the Financial Conduct Authority (FCA), has warned that there is a “pronounced build-up of indebtedness amongst the younger age group”. He was responding to the FCA’s Financial Lives Survey which showed that 55% of 18- to 24-year-olds and 63% of 25- to 34-year-olds are in debt, owing on average over £8,000.
These numbers alone are cause for alarm, and that’s before even considering the harms and vulnerability that over-indebtedness brings. Any debt organisation will tell you about the damage which debt causes to mental and physical health. And yet so many young people are forced into debt, often before they start any meaningful form of work.
This problem should not be seen as a product of “binge” culture, and young people should not just be told to rein in their spending. Rather, this is a problem of affordability.
Rising housing costs; an increase in zero-hours contracts; inflation outstripping wages; the rapid rise in student loans – all of these issues are creating a cage of debt around young people. While the older generation retains financial security through assets (usually in the form of housing) and enjoys greater security in work, the younger generation is more likely to be exposed to the risks of private renting and job insecurity.
How did it come to this?
Amid the global panic arising from the 2008 financial crisis, the UK government propped up a failing banking sector with £1,162 billion in support. At this moment, the private financial crisis turned into a public state crisis.
Crises are usually defined by change, signalling an end to the unstable conditions of the past. Yet the enduring legacy of the financial crisis has been a transformation of the role of the state and public finances, which has left young people in an even more precarious position.
Ten years on from the financial crisis, and eight years after the introduction of the welfare-stripping austerity agenda, one thing still holds true: it is the people who contributed the least towards the crisis who are paying the highest price.
A raw deal
As the UK government continues to pay back its own debts by cutting costs and squeezing out savings, it is really young people who are carrying the burden of debt. What’s worse is, they don’t really have a choice.
In the years since the crisis, fiscal responsibility has been transferred from the state onto the individual. In other words, rather than the state providing services to ensure a basic level of well-being for everyone, it’s increasingly up to individuals to pay the price for their own education, housing and health care.
Nowhere is this clearer than in higher education; whereas the state once invested in the futures of the young, it now saddles university graduates with an average debt of £25,505 each.
Even the government’s flagship apprenticeship scheme uses young people for cheap labour, with 18-year-olds paid as little as £3.40 an hour.
All this means that, unless young people have the financial support of a parent, they are forced to rely on an increasingly punitive and complex benefit system or (more likely) be pushed down the pathway to debt. In these circumstances, it’s unsurprising that debt has become a “lifeline” for so many.
Debt is a major political instrument of control, and it should be seen as such. Individuals shoulder the burden of debt, but it is not an individual problem; it is a problem of society. It is no accident that the young are indebted in the way that they are: it is the product of years of neglect and a lack of investment by the state. The political choices of the UK government got young people into this mess. Now, political action should be used to help them out.