Debt charity warns over crisis

Job cuts and drops in income are set to leave large numbers of households with debt repayment problems, the Consumer Credit Counselling Service says.

The charity said the situation was unsustainable for many families facing rising living costs as well as frozen incomes, as well as those facing the threat of losing their jobs altogether.

Families were said to be the most at risk, especially people with two children on an average of £62 per month left over to service debt once they’ve taken care of household essentials.

So seeking financial advice in the current climate could be a smart move.

The situation was reported to be even worse for those with three or more children, requiring £45 a month more than they were earning just to cover the cost of living.

The charity said that the new tax year will see conditions worsen, when the rate at which 40% income tax appears dropping amid changes to the tax credits system.

CCCS chairman Lord Stevenson said: “The picture is undoubtedly bleak and it seems likely that many more families, including better-off ones, will be increasingly prone to over-indebtedness in the months ahead.

“It is also not a uniform picture across the country: public sector cuts in terms of jobs, spending and benefits will weigh disproportionately on certain groups of people.”

The charity looked at data from more than 400,000 people who it helped with debt problems in the previous year. It said more than half of the people cited a drop in earnings or losing their job as their reason for being unable to keep up with payments, while a third couldn’t even cover living expenses.

Homeowners had more debt than renters, owing £30,000 in unsecured debts on average on top of their mortgage.

Copyright © Press Association 2011