Household debt
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Wealth & assets

Inequality, debt and growth

Salvatore Morelli
Salvatore Morelli
Paolo Lucchino
Paolo Lucchino

Inequality, debt and growth shows that low to middle income households were reliant on borrowing to fund much of their spending for more than a decade before the financial crisis. This report reveals the full extent of the increase in borrowing and deterioration in household savings rates in the run up to the 2008/09 crisis, with the poorest 10% outspending their income by 40% by 2007. Given only a minority of the poorest are homeowners paying off their mortgage, it is highly unlikely this was counterbalanced by an increase in housing wealth.

Key findings

  • Over the 10 years 1997-2007, spending grew faster than incomes across all households, but for the poorest groups this was much more pronounced.  For the bottom 10%, incomes grew by 17% while spending grew by more than twice as much (43%).
  • Even middle income households found themselves falling behind, with incomes growing by 33% and spending growing by 46%, resulting in a negative savings ratio for a full ten years before the crash.
  • The highest income households also saw their incomes grow by less than their spending over the period but still retained a positive – although declining – savings ratio.

Further reading

Ineffective Savings Accounts
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Molly Broome
In too deep?
The impact of the cost of living crisis on household debt
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Felicia Odamtten, Simon Pittaway
Precautionary tales
Tackling the problem of low saving among UK households
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Molly Broome, Ian Mulheirn, Simon Pittaway
Salvatore Morelli
Salvatore Morelli
Paolo Lucchino
Paolo Lucchino