LONDON (Reuters) – A British debt advisory charity said on Wednesday that demand for its services jumped by almost a third in January due to the cost-of-living crisis and it urged the government to reverse its plan to scale back its energy price support for households.
StepChange said the number of new clients seeking full debt advice rose by 32% from January 2022, hitting 18,665.
A sharp increase in inflation over last year and a string of borrowing cost increases have eroded the financial resilience of many households. Grocery inflation hit 17.1% in the four weeks to Feb. 19, according to data published on Tuesday.
StepChange director Richard Lane said the increase in demand for advice was startling and suggested that problem debt was starting to take hold after a year of soaring prices.
“There’s only so much people’s finances can cope with, particularly for those on low incomes, and with financial resilience waning, more people may be forced to turn to credit to make ends meet over the coming months,” Lane said.
Finance minister Jeremy Hunt is under pressure to rethink his plan to reduce the government’s energy support subsidies when he announces a new budget plan on March 15.
At present, energy bills could rise by an average of 500 pounds to 3,000 pounds a year from April.
The Institute for Fiscal Studies think tank said on Tuesday that Hunt may have a 30 billion-pound windfall at the budget and offering further temporary relief on energy bills might be more affordable than tax cuts or permanent public-sector pay rises.
Lane urged the government to “step up to protect those at risk of falling into severe financial difficulty.”
StepChange said the proportion of clients with unsecured debts such as credit cards rose in January for the first time in several months.
Bank of England data published on Wednesday showed that consumers borrowed an additional 1.6 billion pounds ($1.92 billion) – most of it on credit cards – in January compared with the 0.8 billion pounds borrowed in December.
($1 = 0.8313 pounds)
(Reporting by Muvija M; Editing by William Schomberg)
