Inflation problems ‘to get even harder’

In recent months, a new problem has emerged to add to the issues of debt, unemployment and cuts in government spending – that of high inflation.

The latest official figures showed the Consumer Prices Index rate at 4.4 per cent and some groups may be hit particularly hard by rising costs, something that may be particularly painful for those already struggling to find the funds to pay off debts.

Discussing the possible impact on lone parents of price rises, Annie Shaw, editor of CashQuestions.com, observed that food and fuel costs are the main areas where costs are increasing and this will hit all parents hard, but more so those with just one income.

She went on to warn: “I think the situation is getting worse and could potentially get [even] worse.”

Ms Shaw said there is little the government is really able to do at present to help, suggesting the best response for those for whom money is short is to seek bargains and best deals wherever they can.

But for some, saving money through careful budgeting may be not enough, as debts could become increasingly hard to pay and pile up.

In such circumstances an individual voluntary arrangement (IVA) may be the best option, reducing monthly payments and clearing all debts in five years or sooner.

Consumer Prices Index inflation will persist at between four and five per cent through 2011 in the estimation of the Office for Budget Responsibility (OBR), chancellor of the Exchequer George Osborne said in his Budget speech last week.

However, the OBR has also forecasted the rate will fall back to 2.5 per cent next year and two per cent in 2013.

By Amy White