The Debt Advisor Logo The Debt Advisor Logo
Request a callback
blog

NEW GOVERNMENT FACES POTENTIAL ‘DEBT HANGOVER’

Published on:April 29, 2015Author:The Debt Advisor

Figures published today by the Insolvency Service show that personal insolvencies in England and Wales decreased again in the first quarter of this year to 20,826 a reduction of 18.6% on the same period 12 months ago. This figure comprises 4,209 bankruptcies, 6,213 debt relief orders (DROs), and 10,405 Individual Voluntary Arrangements (IVAs). Company liquidations in the first quarter of this year also decreased to 4,052, a 1.3% reduction on the previous quarter and 11.3% lower than the same quarter in 2014.

Bev Budsworth, managing director of The Debt Advisor, commented: “Today’s continued decline in insolvencies, shows that corporate insolvency is now at its lowest level since 2008 and the number of individuals declared insolvent is also at its lowest level for nearly a decade. This means that under the coalition’s tenure, not only has there largely been a constant reduction in insolvencies, in more recent years, there has also been a sustained growth in the economy with record low inflation and interest rates, which has got to be good news for everyone.

“However, we cannot become complacent and an apparent slowdown in the recovery, according to the latest quarterly GDP figures is a timely reminder of this. According to The Money Charity, we still owe over £1.4 trillion in the UK which equates to an average debt of over £29,000 or around 115% of average earnings – we clearly still have a relatively fragile economy and growth that is still not fully making its way down to the average man on the street.”

Bev continued “With the impending election dominating the headlines, we need to be thinking about the impact on the next Parliament and how much of a ‘debt hangover’ the new government will face.

“Household bills rather than consumer debt is now the most common debt problem. Figures from February released by Citizens Advice, who are now dealing with nearly 6,500 debt problems every working day, show that debts like rent are accounting for as much as 41% of their income and, inclusive of council tax, have overtaken credit cards as the biggest problem for households.

New era of debt

“We have entered a new era of debt and whoever the new government is, they need to shape their policy to ensure that there is an adequate rescue culture in place to deal with it.

“Mainstream credit problems are now less of a focus with utility bills and council tax emerging as the priority debts for UK households struggling to balance paying the bills and putting food on the table. This has resulted in food banks seeing record usage, handing out three days’ food over a million times throughout the 2014-15 financial year, according to the Trussell Trust.

“Rental rates are increasing across the UK and, according to RICS are likely to increase another 5% in the next five years – figures only likely to compound the 377 landlord possession claims that are made daily in the UK. The private rental sector is seeing a boom across the UK and has doubled in size, according to the English Housing Survey (EHS), but my worry is, even with caps that some parties have promised, rent will continue to become more and more unaffordable for households whose budgets are being squeezed.

“Continuing austerity measures and benefit cuts, which look set to continue in some shape or form, regardless of what colour the next government is, have widened the gap between the ‘have’ and the ‘have not’s’, with two thirds of UK household struggling to cope to pay their rent, according to the National Housing Federation.”

Bev concluded: “The key question for voters on 7th May has to be how any continued recovery filters down to the man on the street and help the millions of households across the UK who are struggling to cope. When not paid, priority debts will see people left with no roof above their heads or no energy to heat their homes. Voters need to consider whether they will use their vote to stick to what they know in the hope of a continued recovery or gamble on a new government and see what they can bring?”

Bev Headshot Small

Beverley Budsworth, Managing Director of The Debt Advisor