Rising Bills and End of State Support Threaten a ‘Perfect Storm’ of Debt

Britain faces a “perfect storm” of debt as thousands struggle to cope with soaring household spending, charities have warned.

With energy costs alone set to skyrocket at least £ 600 by April, experts warn the UK is on the brink of a “cost of living crisis”.

Households that have so far been protected from financial distress by holidays and government subsidies may face an avalanche of bills they cannot afford – including those who have never been in debt before.

Richard Lane, director of external affairs for debt charity StepChange, said: “We’re seeing some pretty early telltale signs.

“In November, we saw an increase of almost 400% in the number of people accessing our utility area web pages and worrying about paying their energy bills. I think we’re starting to see this worry about the cost of living really kick in.

Mr Lane warns of the end of holidays and last year’s universal credit-boosting programs, combined with rising bills, have created a “perfect storm” for those who come to seek advice from his organization.

“Many of our customers rely on additional support. Even if they work, they rely on things like universal credit, ”he says.

“So many of these customers have seen this decrease with the removal of the £ 20 per week increase in September and October. They are also concerned that interest rates will start to rise and that this will increase the cost of their borrowing. And at the same time, food bills have gone up; energy bills have gone up.

Richard Lane, director of external affairs for the debt charity Step Change, warns we are heading for a “perfect storm”

While food prices, household bills, and mortgage rates have steadily increased throughout 2020, the real impact will be felt in the months to come.

While the price of gas jumped 250 percent last year, consumers have also so far been protected from rising bills by the government price cap, which limits the amount of money that suppliers can charge.

However, a new price cap is due to be set by regulator Ofgem in April and experts predict it will be increased by more than 50% this year, bringing the average annual bill to around £ 2,000.

Ministers are also divided over the 1.25 percentage point increase in national insurance, which some say will hit struggling families the hardest.

A Resolution Foundation report found families could face £ 1,200 by April due to soaring energy bills and tax hikes. Managing Director Torsten Bell said last month: “This overnight cost-of-living disaster is so significant that it’s hard to see how the government is avoiding intervening.”

At the local level, counselors also find it difficult to provide support to all those in need.

Although debt is not new to the UK – three million Britons are in ‘bad debt’ and nine million are in financial difficulty – Amanda Heath, who runs the Melton and District Money Advice Center, says he There has been a sharp increase in the number of clients with “houses … great jobs”.

She adds: “You know, we’ve had a few clients this year that cost £ 70,000-80,000. And obviously they got fired and it all crashed.

Amanda Heath, Head of Melton District and Money Advice Center, says there has been an increase in the number of people in need of help who have “very good jobs”

“We’re just starting to see the results of people losing their jobs and what’s going on in the economy… with what’s going to happen in April, I just don’t know what the response will be to that. Because normally , there is always an answer.

One man preparing for a tough few months is Sam Conniff. Entrepreneur and independent business owner, Conniff’s earnings plummeted in the first months of foreclosure, with little warning.

He says: “During the first two weeks of March 2020, 95% of my contracts, events, reservations… everything just disappeared.

“And what was very annoying to me was that I hadn’t made any reserves during the time I was working… as the foreclosure was coming to an end, I was looking for advice, I was looking for insolvency.”

Although he has managed to stabilize his income – and has turned his experience into a new venture, launching an interactive documentary The Uncertainty Experts, on how to cope with change – Conniff is still worried about the expected increase in household spending.

Entrepreneur and independent business owner Sam Conniff braces for tough months

He says, “What you become very aware of are the additional costs… they might look like small, relatively small price increases, but you add them up and spread them out over the year and you start to see.”

However, there might be a silver lining: an increased willingness to talk about financial problems after the months of hardship caused by the lockdowns.

Lane says: “It’s partly true for the British, isn’t it, that we have very stiff lips and don’t necessarily talk very openly about money.

‘[If] any good thing comes out of the pandemic, I really hope it’s that we recognize a little better that people have financial problems.

“For a lot of people there is a very fragile safety net that can go away very quickly.”

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John A. Bogar