Household debt burden set to double by 2026, outpacing National Insurance tax cuts

People will be forced to fork out an extra £230 a month by 2026, according to Lib Dem analysis. Photo: Marcia Straub

Household debt burdens will double by 2026, with sky-high debt repayment costs dwarfing savings from national insurance cuts.

The Office for Budget Responsibility predicts the cost of repaying household debt will rise from £ From £73 billion in 2023 to £151 billion in 2026, an increase of around £50 billion since the 2008 financial crisis.

According to Lib Dem analysis, this means people will be forced to fork out an extra £230 a month by 2026, compared with the £40 the average worker will save thanks to the Chancellor's National Insurance cuts.

increase relates to the cost of paying off debts, such as mortgage interest, rather than the debt itself.

Rising burden due to rising interest rates

Liberal Democrats attribute the rising burden to successive increases in Bank of England interest rates. .

In his autumn statement on Wednesday, Jeremy Hunt announced he would cut National Insurance by two percentage points from January.

The levy will be cut from 12 per cent to 10 per cent, delivering savings for those on average wages of £35,000 pounds, more than £450 a year, or about £40 a month.

But as debt servicing costs rise, the Lib Dems said it would be a drop in the ocean.

Sarah Olney, Lib Dem Treasury Spokesperson responds to the Autumn Statement. Photo: UK Parliament/Jessica Taylor

Sarah Olney, the party's Treasury spokeswoman, said: “This is a horror show for the British people. There is no end in sight to the mortgage nightmare facing millions.

“Not only have household finances been crushed by a barrage of tax hikes, but they are now faced with household debt not seen since the financial crisis.< /p>

“This is the true cost of the Conservative government crashing the economy with its botched budget. The Liz Truss hangover continues to wreak havoc on the British economy and people's wallets.

“The brutal truth is that any tax cuts before the election will be more than negated by the mortgage bomb.”

A Treasury spokesman said: “This analysis is flawed because it looks at only one aspect of wider policy. package isolated. It ignores the record increase in the National Living Wage, which represents a pay rise of £1,800 for a full-time worker next year; increasing working benefits by £470 a year for 5.5 million families; and £800 Local Housing Benefit for 1.6 million families.»

Tory MPs welcome tax cuts

Tory MPs welcomed Wednesday's tax cuts, but some have made public calls for the pace to be accelerated and have already called his next demands.

Mr Hunt insisted it would «take time to get taxes back to where they were» as he faces a growing tax burden. He did not rule out a cut in income tax next year.

National Insurance cuts were larger than expected. They will come into effect on January 6 rather than the usual April date, fueling speculation that the Tories are considering a snap election.