Household finances “remain under strain”
The Bank of England’s annual survey of household finances confirms what most of us know from our own experience: families’ resources are still stretched paper-thin despite the recovery. High unemployment, stagnant earnings and the fact that credit is harder to get all play their part and families’ “awareness of the fiscal consolidation measures was quite high.” People are more worried about debt – quite rightly, as unsecured debt is at a high level.
And yet, if we look at the economy as a whole, there’s still reasonable progress.The economy is growing and interest rates are very low, both factors that ought to make most families feel better off. But other factors heavily outweight these.
When the survey asked about families’ “available” monthly income (after paying taxes, housing costs, loan payments and utility bills) exactly half said they were worse off than a year previously, more than three times the proportion who said they were better off.
Changes in available income
|Down by more than £100||28%|
|Down by £51 to £100||15%|
|Down by £1 to £50||7%|
|Up by £1 to £50||4%|
|Up by £51 to £100||4%|
|Up by more than £100||6%|
This obviously puts people off spending. They are also deterred by the fact that access to credit is tougher than it was – since 2007, there has been a 10 per cent increase in the proportion of people who say they haveb been put off spending by concerns about credit availability; more than one in five now cite this as a concern.
52 per cent of households now have unsecured debts (such as credit or store cards) and 51 per cent of people with unsecured debts say they are a burden – the highest figure ever.
The proportion of households who say they are falling behind with debt payments stayed the same. The proportion saying that they are keeping up but it is a struggle from time to time or constantly jumped from 34 to 40 per cent. 29 per cent of households with debt say they are more worried about debts than they were a year ago, compared with 12 per cent who say they are less worried.
The latest survey asked new questions about the cuts and the widespread level of public awareness of them leaps out: only 11 per cent said they had not thought about them. Only ten per cent thought they wouldn’t be heavily affected though most people hadn’t yet taken any action in response: 25 per cent weren’t planning to do so and 31 per cent hadn’t yet but would if the need arose.
This strongly suggests that, despite the depressed picture this survey paints, consumer confidence is going to fall even further once the cuts begin to bite. Families in debt face stress and uncertainty – we haven’t yet seen all the harm done by the global economic crisis.