Average family debt set to break £60,000

The admission that personal debt is set to be 3 billion more than previously expected was revealed in a written answer to Glasgow Central MP Anas Sarwar by the independent Office of Budget Responsibility (OBR).

The increase has raised concerns that the government is allowing ordinary taxpayers to take on high levels of debt as it tries to slash its own budget deficit of 155bn by more than 100bn. The coalition has made this its highest priority.

Mr Sarwar said: "Chancellor George Osborne continuously tells us that the consequences will be 'disastrous' if he does not make massive cuts in this financial year.

"But by cutting too fast and too soon, the Tory Chancellor is forcing the poorest and most vulnerable in society to shoulder the burden of debt that the government took on as a direct result of the failings of the financial sector.

"I'd like to know why Mr Osborne has effectively taken a decision to transfer debt to the poorest and most vulnerable in society. Yes, the deficit must be reduced - and the previous Labour government had a robust strategy to do that. But the ConDems' plans are not driven by economics - they are driven by an ideological drive to roll back the state."

There are also concerns that the comprehensive spending review (CSR), due to be published on 20 October with details of cuts by department, will make the situation worse.

• Analysis: Saving and spending should balance

Mr Sarwar's question focused in on measures being taken by Mr Osborne and Lib Dem Chief Treasury Secretary Danny Alexander to bring that government debt down.

He asked the Treasury what effect the increase in VAT to 20 per cent and the cuts to services of up to 40 per cent in some departments, including welfare, were going to have on household debt.

The question was passed on to the OBR, which noted that the Treasury had predicted household debt would rise by 42bn in two years, about the amount cut from the government's spending.

But the OBR said the original figure was an underestimate and the actual increase was likely to be 3bn more at 45bn.This would leave a total debt of 1,564bn, including mortgages, among the 26 million households in the UK, averaging about 60,100 each.

Geoffrey Dicks, of the OBR, who answered the question, said the difference in 3 per cent could be traced back to the changes in forecasts on economic growth.

Already there have been concerns raised by the highly respected Institute for Fiscal Studies (IFS) that the least well-off will be disproportionately hit by the deficit-reduction measures.

This factors in planned welfare cuts of 11bn in the next four years announced by Mr Osborne in his emergency Budget, with at least another 4bn expected to be added on to that figure - despite resistance from Work and Pensions Secretary Iain Duncan Smith, who wants to reform the system first, bringing in savings later.

Labour claims the coalition is cutting too quickly and has pointed to Ireland, which took similar measures and is now in a double-dip recession.

However, the government has consistently argued that it has been left with no choice but to take strong deficit reduction measures to avoid a similar crisis to the one that hit Greece.

Mr Alexander told The Scotsman: "When we came into office we could see what was happening to other countries, particularly in Europe where people were questioning their ability to deal with their financial problems and the consequences that has in terms of higher interest rates, employment, unemployment and the impact on growth, and so on."

Yesterday, David Cameron launched a robust defence of the government's economic policies, claiming they had been successful in getting Britain out of the "danger zone".

The Prime Minister said it had been essential to go in "hard and fast" in dealing with the deficit, an approach backed by the CBI, the IMF and the G20.