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Action on low pay welcome, but budget gaps set to grow

Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said of today’s Summer Budget:

“Raising the national minimum wage for over 25s will undoubtedly help people on the lowest incomes, and is a welcome step forward on low pay.  Freezes in tax credits, however, will affect a far greater number of people – and will further erode the financial positions of many households who are already struggling to cope with everyday bills.

“This could mean a whole new cohort of households falling into financial difficulty.  At National Debtline we have the seen the proportion of people contacting us who are in employment steadily decline, from 66 percent in 2007 to 54 percent last year.  This trend may now reverse as more people who are in work see a gap opening up between their income and expenditure.

“One consequence will be more households turning to credit to plug the gap.  While forecasts for overall household debt have declined slightly, we are concerned that the Office for Budget Responsibility now says that unsecured borrowing will be £48 billion higher by 2020 than previously expected. 

“The changes announced today make it even more crucial that people at risk of falling into financial difficulty are directed to the free advice that can turn their situation around.”

On the Personal Allowance:

“A quicker increase in the Personal Allowance to £11,000 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 Support for Mortgage Interest changes:

“One measure that may receive less attention is the switching of Support for Mortgage Interest payments from a benefit to a loan.  The long-term consequences of this radical change are unclear. 183,000 people currently benefit from this scheme, and the impact of these changes must be kept under review – particularly when interest rates do eventually rise.”

On the new Green Paper on savings:

“We welcome the announcement of a consultation into encouraging a savings culture.  With good progress made on pensions through auto-enrolment, this is a logical next step in driving this agenda forward.”

On the review of Claims Management Companies:

“Claims Management Companies exist to make a profit out of a service that consumers can access for free via the Financial Ombudsman Service – and it is right that the government is looking into this sector.  The government must ensure that people who have a right to reclaim money, many of whom have low or no incomes and are in financial difficulty, are not taken advantage of by these companies.”

The Money Advice Trust also runs Business Debtline, the UK’s only free, dedicated advice service for the self-employed and other small business owners.

On reforms to tax on dividends:

“We are concerned about the impact of significant reforms to dividend tax on some small business owners.  While there is a clear case for dividend tax to be simplified, this must be sensitive to the impact on contractors and many small business owners who receive their main income in this way, and not just on individuals who own shares.”

On Sunday Trading Laws:

“Wherever Sunday trading restrictions are relaxed, local authorites and central government must consider the impact on small retail businesses who may suffer from greater competition from the big chains on Sundays.  We are concerned that some small retail businesses, and in particular newsagents, may fall further into difficulty as a result.  It is vital they are directed to the help they need, including free advice from Business Debtline.”

 
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