by Mark Johnston
The UK economy has begun to recover over the past year but households financial positions remain under strain. Elevated unemployment, weak earnings growth and restricted credit availability still pose a problem for many households.
Gavin Kelly, chief executive of the resolution foundation suggests “many people who scrapped through the recession are going to find the next few years even harder. It is very likely that there will be a significant rise in the number of households struggling to maintain their debt repayments, which is a major concern both for them and the wider economy”.
According to recent research debt and household incomes paint a grim picture of the financial difficulties faced by about one tenth of the UK population, approximately 3 million people are currently finding it difficult to make ends meet and are vulnerable to increasing household bills.
Fuel costs are expected to be a key pressure point in most homes, with increases anticipated of approximately 14.5% on electricity bills and 19.7% on gas bills, between 2010 and 2015, which is approximately a rise of about £209 a year.
Many families are taking drastic measures to adjust to their financial situation, from walking to the supermarket instead of driving, cutting back on non-essentials, to selling the family pet, according to new research from the university of Bristol.
Despite widespread efforts to tighten spending, there is considerable evidence that households are continuing to rely on unsecured debt. While families are using credit cards, overdrafts and store cards with the same frequency and for the same reasons they have before, they are not clearing the balance as quickly or at all, as they have done in the past.
Joanne Elson OBE, chief executive of the money advice trust said “unfortunately too few people recognise their own financial difficulty as a problem they have to solve and instead cut back further and further and then increasingly rely on credit”.
The household budget of those in the lowest income band has fallen by £33 or 6%, between 2005 and 2010. Leaving most people with no surplus cash at the end of the month. The consumer credit counselling service (CCCS) found that many of their clients had no money left to repay their debts once they had covered the basic cost of their living expenses.
Critics say that the impending £5 billion benefits raid by George Osborne will only make matters worse.
Reports have shown that financial difficulty is likely to spread wider and affect more people than was previously thought.
Lord Stevenson, chairman of the consumer credit counselling service (CCCS) has said “figures have confirmed our fears that troubled times lie ahead for many people in the UK”.
It is therefore important that the fact many households are vulnerable at this time is understood and also addressed by the government as well as the financial and charitable sectors.
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