Debt management issues may grow as chancellor warns of recession risk

A eurozone recession is likely to send the UK economy back into a state of contraction, chancellor George Osborne has admitted.

Delivering his autumn statement in the House of Commons, Mr Osborne noted that the Office for Budget Responsibility is not forecasting a recession, but has slashed its growth forecasts to 0.9 per cent for this year and 0.7 per cent for 2012.

And, he noted, this prediction is based on the assumption that the eurozone finds a solution to its own crisis, with a "much worse outcome" for the UK if this does not happen.

He said: "If the rest of Europe heads into recession, it may prove hard to avoid one here in the UK."

This stark warning may be the first acknowledgement of a potential situation that may see Britain face not just a recession, but more public and private debt, lower growth in the longer run and with it more people out of work and unable to pay their debts.

Those who do get into such a situation may benefit from having a debt management plan in place, to spread their repayments over a longer period.

Meanwhile, Mr Osborne announced some measures aimed at helping hard-pressed consumers, such as reducing the amount rail fares can be raised by to the retail price index plus one per cent – instead of three per cent – and cancelling the 3p rise in fuel duty due in January.

The low forecast for economic growth comes despite the Office for National Statistics confirming last week that economic growth was 0.5 per cent in the third quarter of this year.

Posted by Paul Thacker