Oral Answers to Questions

Clive Efford Excerpts

Tuesday 17th January 2017 Commons Chamber

[Simon Kirby]

That is well under way and we are keeping a close eye on it.

[Clive Efford (Eltham) (Lab)]

9. What recent assessment he has made of the effect of high levels of household debt on the economy.

[The Chancellor of the Exchequer (Mr Philip Hammond)]

Households’ financial positions have improved. Household debt has fallen from 160% of household income in quarter 1 2008 to 144% in Q3 2016. UK households have undertaken the second-largest amount of deleveraging in the G7. However, we should be alert to signs of a recent reduction in the level of household savings. The savings ratio is now—in Q3 2016—at 5.6%, which is down from 6.6% in Q3 2015.

[Clive Efford]

Notwithstanding that, household debt is very high, and housing costs are a big proportion of households’ expenditure. Has the Chancellor made an assessment of the impact of an interest rate increase on growth, given that that growth is driven by consumer spending?

[Mr Hammond]

Yes. The Bank of England makes regular assessments of the impact of changes in interest rates—that is a central part of the modelling work that it does. The hon. Gentleman is absolutely right that one of the drivers of the relatively high household debt levels in this country is our housing model, with relatively high percentages of home ownership.