Debt crisis ‘set to get worse’

The debt crisis could be set to get even worse due to inflation and unemployment being higher than expected, it has been claimed.

Such is the prediction of the Consumer Credit Counselling Service (CCCS) in response to revised forecasts for both economic indicators this year made by the Office for Budget Responsibility (OBR).

The OBR revised both of these upwards, tipping consumer prices index (CPI) inflation to stay at over four per cent this year and unemployment to reach 8.2 per cent, chancellor George Osborne announced in his Budget speech last week.

With one of these factors greatly reducing income and the other lowering the value of it, the CCCS said the ability of a great many people to pay off what they owe will be diminished.

Already, the average person seeking help only has £43 spare a month to pay typical debts of £22,000, it said.

External affairs director at the CCCS Delroy Corinaldi remarked: “The OBR forecast spells disaster for thousands of UK consumers and the next few years will see a significant rise in the number of people in need of financial help and advice.”

The CPI rate will fall next year to 2.5 per cent and to two per cent in 2013, the OBR forecasted.

However, the body also said the rate of economic growth will be slower this year than estimated before, with this prediction revised down from 2.1 per cent to 1.7 per cent.

Editor of InvestmentandBusinessNews.co.uk Michael Baxter said last week this was no surprise, because the original estimate was “too optimistic”.

By Joe White