Child benefit ‘to lower household budgets further’

Consumers who owe money may need to adopt more debt consolidation measures as child benefit cuts take effect, with this set to trim family incomes.

Discussing the reduction in the benefit in a BBC podcast, spokesman for MoneySupermarket Kevin Mountford said a report at the beginning of the year indicated each family would be £1,000 a year worse off, adding that with some of the austerity measures coming into effect beyond 2012, the situation is now "becoming even tougher".

He added: "All across the country now, this is proving that it is not just low-income families that this is starting to bite as we come into the Christmas and winter period.

"We're going to have to look a little bit more tightly as we are going to have to improve outgoings elsewhere."

Those whose incomes are squeezed not just by factors like reduced benefits and income freezes but also debt may at least be able to directly affect the last of these factors.

Consolidating debt into new loans or lower-interest credit cards is a way many people could cut their monthly repayments, helping to put more much-needed cash in their pockets.

People who are in serious debt may need to take further measures, such as having a debt consolidation plan or even an individual voluntary arrangement (IVA) if the amount they owe is £15,000 or more and impossible for them to pay.

Advice should be sought when considering an IVA, as it does constitute a form of insolvency, but it can also be a way out of debt over a period of five years or less, during which time payments will be reduced in agreement with creditors.

The strain on budgets as Christmas approaches that Mr Mountford referred to may see some consumers choose to spend less and avoid borrowing to fund present buying and other costs.

An HSBC study found 13 per cent of consumers will use credit or store cards to fund this year's festive spending, down from 16 per cent last year.

Posted by Paul Thacker