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|Tax and savings changes welcome but spectre of household debt remains|
|Wednesday, 16 March 2016|
Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said of today’s Budget: “Further increases to the personal allowance, a fuel duty freeze and help for people to build up savings will be welcomed – but the spectre of rising household debt remains.
“Alongside today’s Budget, the Office for Budget Responsibility has revised its forecast for household debt, which is now expected to reach 164 percent of incomes by 2021 – just five percent shy of its pre-recession peak. With consumer credit growing at what the Bank of England has described as ‘a rate of knots’, we remain concerned that a minority are using credit to shore up their finances.
“Given this rising household borrowing and the impact of further welfare changes, the announcement alongside the budget of changes to funding arrangements for debt advice is an opportunity to ensure that more people get the free advice they need.
“We look forward to working with whatever body replaces the Money Advice Service to ensure there is a smooth transition, and that people in financial difficulty receive the free advice they need, including from our National Debtline and Business Debtline services.”
On the Personal Allowance
“The increase to £11,500 next April will be welcomed, but we must remember that anyone earning more than £8,060 still pays National Insurance. An increase in the National Insurance threshold would make a significant difference to those on the very lowest pay, and this is something we hope the Chancellor will consider in a future Budget.
On Help To Save
“Rainy day savings are a key weapon in the war against problem debt. Putting aside a small amount of money that you can access in an emergency reduces the risk of debt problems later on – and anything to encourage people to save should be warmly welcomed.
“We are pleased that Help To Save will be targeted at those who need it most, and hope that the scheme will play a part in building the savings culture that the UK so badly needs.
On the ‘Lifetime ISA’
“The Chancellor’s pledge to match, by a generous 25%, any savings of up to £4,000 a year made by the under-40s is a welcome addition to the announcement of the Help to Save scheme. This should act as both a help and an incentive for individuals to build up their savings over their lifetime so that they are in as strong a financial position as possible when they come to major milestones such as buying a property of taking retirement.
On fuel duty
“The Chancellor’s decision to continue the fuel duty freeze, despite falls in fuel prices, will be widely welcomed by households, for whom fuel costs can represent a substantial proportion of their monthly outgoings.
On Insurance Premium Tax
“Insurance cover is a key part of individuals’ household budgets and it is likely that the 0.5% insurance premium tax rise will be passed on to consumers. This threatens to further increase the pressure on the ability of many households to make ends meet, and could discourage people from taking out insurance, which can be a crucial tool in guarding against unexpected income shocks.
On changes to disability benefits
“These further changes to disability benefits will have a big impact on many people who are already under significant financial pressure – and it is crucial that they have access to the free advice they need.
On the Money Advice Service
“The scale of the need for free debt advice is significant, and exceeds what is currently available. Today’s announcement is an opportunity to address this gap.
“We look forward to working with whatever body replaces the Money Advice Service to ensure there is a smooth transition, and that people in financial difficulty receive the free advice they need, including from our National Debtline and Business Debtline services.
“It is crucial that any successor body prioritises resources for frontline services, and we will continue working with our partners in the free advice sector to ensure these are used to maximum effect. This should cover the whole range of telephone, online and face-to-face channels, to ensure that consumers can access advice in the way that works best for them.”
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