This article was first published in the July/August 2016 international edition of Accounting and Business magazine.

Financial resilience in Britain is at a brittle, all-time low. For certain groups, financial security is something enjoyed by others. Research by ACCA identifies three vulnerable groups: the self-employed, zero-hours contract employees and students funding education by personal borrowing. 

The point of the ACCA report, Britain’s debt: how much is too much?, was to recommend policies to encourage saving and reduce personal unsecured debt, looking at digital innovations that could make material improvements. 

Before examining its findings, we should consider the gloomy picture of a 21st-century Britain in bondage to debt – a picture you might have thought belonged to another era. However, since the financial crisis, a significant increase in consumer credit has led to over-indebtedness.

The ACCA research found that 35% of households have no savings, and a further 13% less than £1,500. That makes such groups more open to ‘problem’ debt – debt that carries a high cost of repayment that can be unaffordable in both short and longer term. Locked out of conventional credit markets, they access ‘non-standard’ markets, such as high-cost credit cards, hire purchase and payday loans. Here, APR is 30% if you’re lucky; for payday and home-collected credit it can reach 1,500% on loans usually repaid within a month. 

And because more are falling into those three vulnerable groups (the percentage and absolute number of self-employed are at their highest levels since records began), it is harder for society as a whole to build up financial resilience. This has an impact beyond personal misery: it has implications for economic growth. Financial insecurity reduces workers’ productivity. The Bank of England estimates that average annual productivity growth has been around zero since 2007 and that the economy is approximately 15% smaller than it would have been had annual productivity growth been just 2% over those years.  

There are signs that individual indebtedness could become a major political issue. Around the time ACCA’s report was published, social media was stirred by the issue of student loans. A student sent an impassioned letter to his MP, along with his student loan statement, unleashing a general sentiment that today’s students and recent graduates – who have seen their debts rise by as much as £180 a month in interest – were duped by the government over the rate of interest, when the charging period would start, and at what earnings level repayments would kick in. Today’s student is likely to have a debt-to-income ratio worse than that of Greece. 

In the 1990s, a mass movement defeated the ‘poll tax’ and contributed to the ending of Margaret Thatcher’s premiership. The riots echoed to the refrain ‘Can’t pay, won’t pay’. Maybe some 25 years later, we’ll hear that refrain again.

This anger was foretold in April 2014 by the Institute for Fiscal Studies in its paper Payback Time? Student Debt and Loan Repayments: what will the 2012 Reforms Mean for Graduates? It noted: ‘Whereas graduates might previously have hoped to pay off all their debts by their late 30s, most will now continue to be paying back their student loan until their early 50s.’ How that debt will affect their careers, their attitude to entrepreneurial risk, their plans for a family – and the outworking for society generally – is a new unknown. As ACCA asks, how much is too much? 

Peter Williams is an accountant and journalist