The charts that show Osborne is cutting the deficit by making ordinary people take on more debt

Household debt to income will rise sharply over the coming years

Hazel Sheffield
Thursday 26 November 2015 18:28 GMT
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Osborne is cutting public borrowing, or rate the Government borrows money, but shifting debt onto the private sector
Osborne is cutting public borrowing, or rate the Government borrows money, but shifting debt onto the private sector (AFP/Getty Images)

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Louise Thomas

Louise Thomas

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The Chancellor George Osborne has set out his plans for how to cut the deficit and deliver a budget surplus of £10.1 billion by 2019-20.

That means he wants to cut public sector borrowing so that the Government is taking more than it borrows by 2020.

(OBR)

It doesn't mean he'll eliminate the national debt, which still stands at £1.56 trillion, or 81.6 per cent of GDP.

He's going to cut borrowing using taxes and spending reductions, including an apprenticeship tax on businesses, raising stamp duty for those buying to let, and giving local councils the power to charge more tax.

The poor are going to bear the brunt of these changes. The Institute for Fiscal Studies said that 2.6 million working families will be £1,600 poorer a year because of Osborne's policies:

Resolution Foundation
Resolution Foundation (Resolution Foundation)

But private sector debts, belonging to individuals and companies rather than the state, continue to grow.

Financial services - like banks and mortgage lenders - have become more and more important to the UK's economy at the expense of manufacturing and construction:

Value Added per sector in volume (right) and value added per sector as % of GDP (left)
Value Added per sector in volume (right) and value added per sector as % of GDP (left) (New Economics Foundation)

These banks are lending more in mortgages as people stretch to get on the property ladder with schemes like help to buy:

(New Economics Foundation)

Which means household debt to income will rise sharply over the coming years, according to estimates from the Office for Budget Responsibility.

(OBR)

"The massive subsidies the government is offering to first-time buyers will encourage a borrowing splurge that will serve only to inflate household debt, which is already at very high levels relative to income.

"The danger now is unsustainable private debt, not public debt," Josh Ryan Collins, associate director for economy and finance at New Economics Foundation, said.

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