The UK’s leading debt charity has warned the cost-of-living crisis could plunge an “unprecedented” number of households into the red.
Experts have warned 1.3m people - including 500,000 children - will fall into absolute poverty by 2022/23 unless more assistance is provided by the government to ease the squeeze.
The UK’s leading debt charity, StepChange, has told Yahoo News UK the country is facing a household debt crisis as Brits turn to credit to cope with rising prices on essentials like food, fuel, and utility bills.
“On several measures, I think it is as bad as we’ve ever seen it - and possibly heading to worse,” said Sue Anderson, head of media at StepChange.
Anderson said traditionally those seeking debt advice can do so after a divorce, or a bereavement - but now the charity are seeing people who are citing the cost of living as a driving factor.
“We’ve now seen the rise in the cost of living creeping in as a reason for people’s for people’s debt, not just an exacerbating factor,” she said.
She added: “What we’re not seeing is sort of, you know, runaway problems in the credit market.
“But, what we are seeing, is this potential for for lower income households just not have any flex or ability to be able to meet their basic essential costs.”
Polling conducted by the StepChange and YouGov found one in five people are expected to be driven into problem debt in 2022.
Nearly half the population expects to use up their savings this year, too.
Anderson said StepChange want to see the government “recognise that problem” as Brits struggle to meet their bills - joining organisations like the Resolution Foundation and the Institute for Fiscal Studies (IFS) in calls to up-rate benefits in line with current inflation.
The Treasury’s decision to rule out up-rating benefits in line with inflation is tantamount to around an £11bn cut.
“Energy bills and food…are going to be a big bulk of what those households will be spending a lot of their money on,” said Anderson.
Adding: “So, before you start, you’re in a shortfall situation [because of inflation] - people haven’t got enough money to meet these basics.”
The charity say they are also concerned about people being pushed off track with their pre-existing debt repayments because of rises in the cost of living.
“I think what we are also seeing is that, among our existing clients who might have been trundling along in a way that would see their debt being repaid or managed sustainably over a period of time, a lot of those people will also be worrying now about being pushed off track because that cost of living crisis,” said Anderson.
The warnings about household debt come as the Office for Budget Responsibility (OBR) say that the UK is facing the steepest drop in living standards since records began.
A Treasury spokesperson said: “We understand that people are struggling with rising prices, while we can’t shield everyone from the global challenges we face, we’re supporting families to navigate the months ahead with a £22 billion package of support this financial year.
“That includes saving the typical employee over £330 a year by raising the National Insurance Contribution threshold, lowering the Universal Credit taper rate to help people keep more of the money they earn, and providing millions of households with up to £350 to help with rising energy bills.”
Watch: UK heading for worst cost-of-living crisis in 70 years, says economist