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UK households ‘face debt crisis’

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Rising unemployment and high inflation will lead to a debt crisis for thousands of UK households over the next five years, a debt charity has warned.

The Consumer Credit Counselling Service (CCCS) revealed almost half the people it counselled last year cited unemployment or reduced income as the reason for their debt problem.

The charity said it was very concerned about revised Office for Budget Responsibility (OCR) predictions for peak unemployment, inflation and debt, given that household budgets are already under financial strain.

CCCS figures showed that, on average, its clients had only £43 a month in disposable income to repay over £22,000 in unsecured debt.

The Office for Budget Responsibility’s (OBR) has forecast that unemployment will now increase by 8.2% and inflation will jump by 1.1% by the end of 2011.

Last August, the OBR said that household debt would decrease as a percentage of household income over the next five years, but it now expects debt as a percentage of household income to rise from 160% in 2011 to 175% in 2015.

Delroy Corinaldi, CCCS external affairs director, said: “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


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