Following the Bank of England’s decision to raise the base rate by 0.25 percentage points today, StepChange Debt Charity has warned that a further hike in the cost of borrowing will add to the financial woes of low income households unless targeted, tangible support from Government is forthcoming.
While StepChange recognises the important need to subdue inflation to protect the wider economy, relief in the form of lower inflation is unlikely to occur quickly enough to help struggling households through the coming months. The charity is already seeing clients’ disposable income vanishing amid the cost of living crisis, hampering people’s ability to make ends meet and leaving increasing numbers of clients with more money going out than they have coming in. The cost of living is now the third most common reason for people approaching the charity for help.
StepChange is warning that if the country is to avoid a prolonged hangover of household debt problems that will hamper society and the economy for years, the Government needs to take additional steps to shore up the finances of those on the lowest incomes.
StepChange Director of External Affairs Richard Lane said:
"The current level of support offered by Government, while welcome, falls short of what’s needed to mitigate the double whammy of rising inflation and interest rates the country now faces. The Treasury showed itself to be agile and reactive to the country’s financial challenges during the pandemic – it’s now time to display these same traits in response to a similarly dire situation. Measures including raising benefits to match current levels of inflation, furthering energy bill support, pausing deductions to benefits and halting debt enforcement and the use of bailiffs where households are vulnerable and unable to pay, are all ways in which those on the lowest incomes can be helped to navigate the current crisis.”
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