UK Growth - save or spend

18 Oct 2011 Channel 4 News

Background:
The PM David Cameron did not urge all of us to pay off our credit bills to help the country out of the debt crisis. But should he have?
In March, the Office for Budgetary Responsibility (OBR) predicted the economy will grow by 2.8% in 2015. But that estimate is based on household debt increasing by £566bn.
What would happen if we did all pay off our credit cards? The outstanding bill on consumer credit cards is £57bn. According to the Institute of Public Policy Research (IPPR), if we paid it all off over the course of this Parliament consumer spending would reduce by 1.75% every quarter and GDP by 1% a quarter. That the IPPR argue would pull the economy firmly back into recession.




Presenter --
Jasmine, you agree with David Cameron?


Jasmine Birtles (of Moneymagpie.com) --
Yes I very much think that we do need to pay off our debt individually as families. We need to pay off debt and we need to be saving and looking after our future selves.


Johnathan Portes (Director, NIESR) --
Well if everybody did that then like the IPPR said it would take us right back into recession. That doesn't mean that Jasmine isn't partly right -- individually families may need to pay off debt now and indeed save -- but if everybody paid off their debt now that would indeed be disastrous.

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