The Big Money Guide

Tag: debt problems

  • One More Reason Why Britons are Sliding into Debt

    One More Reason Why Britons are Sliding into Debt

    What would happen to a nation if its citizens were to gradually earn less instead of more? A logical answer to that question would be that they would eventually succumb to debt and that many of them will in the end face bankruptcy.

    The sad reality is that we are not talking about a theoretical nation here. According to the results of a new study by the TUC, the level of real earnings in the UK has been dropping consistently over the past seven years.

    The study reveals that since 2007, there was a drop of 8% in average real earnings in the country after taking into account escalating prices and an absence of wage growth to compensate for the former.

    couple-talking-about-debt

    This means the latest pay squeeze is worse than what happened during the Great Depression. It is, in fact, the worst since the start of the Victorian era around 150 years ago.

    The fall in real spending power of British consumers was shown to be more than double the reductions recorded during the financial crises of 1865-1867, 1874-1878, 1921-1923 and 1976 to 1977.

    During the worst of these recessions real income dropped by only 4%. The latest downturn is also lasting much longer than any of the recessions quoted above, which makes it fair to say that we are living in the worst recession in recent history.

    Frances O’Grady, the secretary general of the TUC, called the situation ‘shocking’ and said: “The government says the economy is growing again, but there’s no evidence of any recovery in ordinary workers’ pay packets.”

     

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  • Problem Debt Costs the UK £8 Billion Per Year

    Problem Debt Costs the UK £8 Billion Per Year

    StepChange, a national debt charity, has carried out extensive research on the cost of what it calls ‘problem debt’ – and the results are quite astounding. After studying the files of more than 100,000 of its clients, it calculated that the total cost to the UK taxpayer is in the reign of £8.3 billion per year.

    The charity identified job related problems and housing issues as the two main culprits causing people to get into serious debt. It says the government alone could save as much as £3 billion if it offered better assistance to people with problem debt.

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    StepChange defines problem debt as debt taken on by individuals that they cannot afford to repay as agreed with the lender., and believe this puts severe strain on the country’s employment, mental health and housing systems.

    The single biggest problem that individuals with problem debt often face is having to move to more affordable housing after falling into arrears on rent or mortgage payments. As a result, many then have to be paid housing benefits by the state.

    Next on the list are employment-related costs such as individuals taking time off work because of the stress caused by unmanageable debt, as well as the benefits such people have to be paid if the job is eventually lost. The charity says this costs the country around £2.3bn per annum.

    In its survey, StepChange also accounted for the cost of children being taken into care, divorce settlements and NHS mental health treatment caused by problem debt.

    The debt charity believes that the government should do more to help, but a Treasury spokesperson pointed out that the Money Advice Service already plays a key role in this regard.

     

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