8 July 2015
In response to today’s Budget, Mike O’Connor, Chief Executive of StepChange Debt Charity, said:
“Action on low pay is much needed as years of stagnant wages and rising living costs have left millions of households living on a financial knife edge. However, cuts to the safety net risk leaving those people who fall into debt more vulnerable to deep and entrenched financial difficulties.
“Most people who fall into debt do so as a result of sudden changes in circumstance such as job loss, reduced hours and illness. When people suffer these life events they need the right kind of support to help them get back on their feet. For many people, credit has become their ‘distress safety net’.
“The erosion of the social safety net through cuts to Child Tax Credits, Housing Benefit and Support for Mortgage Interest (SMI) risks taking away vital lifelines for the people we help. We estimate that 450,000  people in severe problem debt rely on Child Tax Credits to meet their basic costs, while 89% of these families we help rely on this support to cover their essential costs.
“Debt is rarely just a financial problem. We know that problem debt costs the UK £8.3bn  in additional costs, including lost productivity, additional mental health care costs and additional housing costs. As part of an adequate safety net we need better protections for people struggling with debt. The previous government announced a review of debt administration and proposals that would see people who seek help with their debts given ‘breathing space’ with a freeze on interest and charges. This government must now commit to carrying out this review.”
Notes to editors:
- We calculated that the 485,000 individuals in households StepChange Debt Charity gave advice to in 2014 represent a sixth of the 2.9 million individuals in severe problem debt in Great Britain. In scaling up figures based on our client data, we assume that our clients are reflective of the wider population in severe problem debt.
- Cutting the cost of problem debt - StepChange Debt Charity (October 2014)