Abacus Daily Debt News

A second successive Christmas spent on jobseekers allowance looms for 279,000 people, the Trades Union Congress (TUC) has said.

Research by the TUC of official figures has indicated 35,000 more people will be spending a second successive festive season on the dole, with this number having risen from 243,000 last year and from 122,000 in 2007.

Such a situation could leave some needing debt help, as they have lost the income that would be used to pay off loans and credit card debts.

TUC general secretary Brendan Barber said: "As people gear up for the festive break, there won't be much cheer for the quarter of a million people who are spending their second successive Christmas on the dole."

As well as rising unemployment - now at 2.64 million - those in work are being squeezed by falling pay rates, which may reduce the benefits of a drop in inflation.

The Office for National Statistics revealed settlements for total pay excluding bonuses rose by two per cent in October, down from 2.3 per cent in September.

By Amy White

People who are struggling with financial constraints such as credit card debt could ease the pressure by seeking to supplement their income.

According to research commissioned by the Bank of England (BoE), many of those who are suffering from an "income squeeze" at the moment are looking to boost their financial position by getting a new job.

The study, which was undertaken by NMG Consulting, also showed that some are choosing to put in more hours at their current place of employment.

"Most households have experienced an income squeeze over the past year," the BoE commented.

"And around half [have] been affected by - and had responded to - the fiscal consolidation."

However, the BoE noted that its policy of keeping interest rates at a record low of 0.5 per cent has helped to mitigate the spread of the problem.

This comes after the Office for National Statistics revealed that total pay including bonuses rose by two per cent in the three months to October, compared with 2.3 per cent in the three months to September.

Inflation expectations for the year ahead have eased slightly but remain high, suggesting debt management could be required by people who find their incomes squeezed.

The survey from the Bank of England and GfK NOP revealed that median expectations of the rate of inflation over the coming year were 4.1 per cent last month, compared with 4.2 per cent in August.

Attitudes to inflation in the longer term appeared unchanged, with respondents giving a median answer of 3.5 per cent when asked to predict the inflation rate in five years' time.

The survey also found that 39 per cent of respondents expect rates to rise over the next 12 months, compared with 38 per cent in August.

Debt management help could be needed by some Britons if their salaries are squeezed by inflation in 2012, with 28 per cent of respondents saying it would be best for them if rates went down.

The Bank of England's next Inflation Report, which presents an assessment of inflation prospects for the next two years, is due for publication in February 2012.

By James Francis
 

The Office of Fair Trading (OFT) has announced the launch of a new market study into motor insurance, which could be good news for people left with debt worries by the cost of running a car.

Evidence collected by the body indicates that UK insurance premiums increased by about 12 per cent between 2009 and 2010, with a further nine per cent rise recorded in the first three months of 2011.

According to the OFT, the study will look particularly closely at the provision of third-party vehicle repairs and credit hire replacement vehicles to claimants.

This is an area where the organisation believes features of the market are currently restricting and distorting competition.

"We suspect companies may be competing to extract money from each other rather than keeping premiums as low as possible and providing car owners with value for money," said Sonya Branch, senior director of services, infrastructure and public markets at the OFT.

The Consumer Prices Index inflation rate fell to 4.8 per cent in November 2011, it was revealed yesterday, but this left the rise in the cost of living still at over twice the government's target rate, maintaining the pressure on indebted consumers.

Those struggling with debt may find they are not helped by another fall in pay rates.

Figures published by the Office for National Statistics (ONS) today (December 14th) have indicated total pay including bonuses rose by two per cent in the three months to October, compared to 2.3 per cent in the three months to September.

The rate excluding bonuses was 1.8 per cent - up 0.1 per cent on September, but these figures still represent a fall in income in real terms compared with a year before, as they are well below inflation.

And while inflation has fallen in recent months, any reduction in the rate of income could erode or cancel out the advantage consumers gain, ensuring they continue to get worse off in real terms.

The news comes a day after the official Consumer Prices Index rate was revealed to have dipped from five per cent in October to 4.8 per cent in November.

By Joe White
 

Debt problems may be on the horizon for many consumers in the new year, after research from the Co-operative Banking Group found that only 42 per cent saved enough to fund the festive season.

According to the lender, men tend to put away more than women for Christmas, with averages of £460 and £400 respectively.

No statistics were provided on how these savings were accumulated, although it may be likely that for those who will have to borrow money, credit card debt will follow.

However, it was discovered that those in the north-east, Northern Ireland and London were the most successful at keeping cash to one side for the holidays.

The head of savings at the Co-Operative Bank Zach Hocking emphasised how expensive Christmas can be.

"We would encourage and help everyone get into the habit of saving every month, whatever that amount might be," he added.

The research follows a similar survey published earlier this week by Citizens Advice and Barclaycard.

It said a third of consumers struggled with household bills last January due to blowing the budget over the festive period.

By James Francis
 

The number of people who need debt help may be held down by new measures aimed at stopping a major downturn in the eurozone.

Britons could face bigger debt problems as a result of job losses caused by a new recession if its biggest trading partner goes on struggling, but this prospect may have receded after the European Central Bank (ECB) acted yesterday on rates and bank support.

It cut its three main interest rates by 0.25 per cent and introduced extra support to increase credit availability and liquidity for banks in the zone - a move aimed at preventing a new credit crunch.

However, even if the measures do help the economy in Europe, there are still major problems of slow growth and debt, meaning trade with the UK may be held back and that Britons will go on suffering the effects of a weak economy.

Commenting on the ECB moves, deputy chief investment officer of fundamental fixed income at Blackrock Scott Thiel said: "We view these steps as positive - particularly as they were delivered before the EU summit taking place over the next two days."

By Joe White
 

The cost of debt consolidation may be kept down by lower inflation, with new data indicating the impact of shop prices is likely to help the cost of living ease.

According to the British Retail Consortium (BRC)-Nielsen Shop Price Index for last month, the year to November saw prices on the shelves rise by only two per cent, down from 2.1 per cent in October and the lowest increase for a year.

BRC director-general Stephen Robertson attributed the situation to a price war as Christmas approaches, commenting: "For a second consecutive month the supermarket price war has helped reduce food inflation."

He said lower commodity costs and other factors such as the cancelling of January's fuel duty rise will also bear down on inflation.

Lower inflation may help the Bank of England's Monetary Policy Committee (MPC) to hold the base rate at 0.5 per cent for longer, making the cost of debt consolidation potentially cheaper.

According to the minutes of November's MPC meeting, the committee believes inflation has passed its peak and is set to plunge in the next few months.

By Amy White
 

Parents may end up with the biggest debt problems in the new year because of Christmas if they have older children, a survey has suggested.

The study by LV= of spending on children revealed the average under 18-year-old has £178 spent on them in terms of presents and stocking fillers.

However, this figure rises with age, peaking at £220 for those aged seven to 11 and only a little less at £217 for those aged between 12 and 17.

Although such children may be rather less likely to believe in Father Christmas, stocking filler costs remain the same for them (£24) as they do for other age groups above three, with the very youngest children having the cheapest stockings.

One reason may be the demand from older children for more expensive presents, such as computer games.

Those keen to avoid getting into debt with Christmas spending may find they benefit from searching more for bargains, something a survey published this week by Clydesdale and Yorkshire banks revealed 47 per cent of shoppers now do.

By James Francis
 

Britons may be risking getting into debt this Christmas by splashing the cash, according to new figures on cashpoint withdrawals.

Figures from Link showed that the level of money drawn out in the week to the first Sunday of this month (December 4th) were 11 per cent up on the equivalent period in 2010.

Wednesday November 30th and Thursday December 1st both saw 25 per cent increases on the figure taken out on those days in 2010.

But while the extra £2.6 billion of withdrawals may be good news for retailers, it could also mean more people are eating into their overdrafts and risking debt problems in the new year.

Consumers have been warned by experts to keep their Christmas spending down if they find money is tight.

Chief executive of Credit Action Michelle Highman recently offered such advice, saying: "Try not to live beyond your means over the festive period - otherwise you might face a difficult new year."

By Joe White