Posted November 18, 2022
Like many charities in the debt advice sector, our attentions have been firmly fixed on the Chancellor’s Autumn Statement and what it means for the people we help at National Debtline and Business Debtline.
Widely trailed in the media as a tightening of the public purse strings with added fiscal drag, the Chancellor had set himself the difficult task of balancing the books, while making sure those caught at the sharp end of the cost of living crisis have the support they need. For our clients, the focus was very much on the latter, but did the Chancellor deliver?
Some much-needed relief
The majority of National Debtline callers (63%) are on low incomes and almost a half (45%) have incomes too low to cover their basic essentials. With soaring inflation hitting household budgets hard, the widely anticipated decision to increase benefits in line with inflation was long overdue, but welcome. The increase, set to September’s 10.1% inflation level, and due to kick in in April, will undoubtedly go some way to support those on the lowest incomes.
So too will the increase in the benefit cap, and the additional cost of living payments to people on means tested benefits, pensioners and those on disability benefits. There is also £1 billion in additional funding for local authorities to provide help under the Household Support Fund. All of this is good news and marks a move towards more targeted support for the most vulnerable households.
More tough times ahead
However, with the Office for Budget Responsibility predicting a grim outlook for the next few years, not least a drop in household disposable income of 7% across the board (the biggest fall on record – taking us right back to 2013 levels) and unemployment rates set to increase, this will not be enough to ensure all are able to weather the storm.
The commitment to continue providing support under the Energy Price Cap Guarantee was welcome. But this will rise, taking the average annual household bill up by £500 (from £2,500 to £3,000) in April.
For the one in nine UK adults who are already behind on their energy bills, this steep climb in costs will only add to their financial worries. And for those on more expensive pre-payment meters, the impact will be even more severe.
What was missing?
Council tax payments are also likely to rise for most households. A predicted 95% of local authorities are set to make use of the power to raise council tax by up to 5% without a referendum, afforded to them by the Chancellor. Councils are stretched, and when the need for support in their locality is high there is even more pressure on their budgets, so it is not surprising that many will seek to increase their revenue this way.
However, for many households, meeting these higher payments simply won’t be possible. And with council tax collection practices often outdated, and with no additional support for people who cannot afford their payments, we’re likely to see more households subject to harsh council tax collection practices when rate-rises kick in.
There was also no additional support provided for private renters, many of whom will likely have to bear the brunt of increasing interest rates that are pushing mortgage rates to a higher level than we’ve seen in years. Most people who contact National Debtline for help (73%) are in rented accommodation - our fear is many simply won’t be able to cover any increases in rent.
What can the government do?
The wide impact that the cost-of-living crisis is having across the board needs to be matched with additional support. This support needs to focus on key areas that we know will have a significant positive impact for people who are struggling now, and needs to provide much needed reassurance for what will be difficult times ahead. To meet the scale of the challenge, we’re urging the Government to:
- Provide support to low-income households who are struggling with their energy costs, but are not receiving means-tested benefits and will not receive the additional ‘cost of living payments’ announced by the Chancellor.
- Work with Ofgem to suspend forced installation of pre-payment meter to prevent self-disconnection during the winter months.
- Bring in much needed reform of existing council tax collection rules and Increase funding for local Council Tax Support schemes, so all councils can provide100% support for those eligible.
- Provide much needed support for people in rented accommodation, including uprating the Local Housing Allowance with inflation.
Some good news in the small print
Whilst there is more that we think the Government could and should do to support households in need, the Autumn Statement did include some good news in the form of much needed reform of the Support for Mortgage Interest scheme, which provides a loan for people on Universal Credit and certain other means-tested benefits to help pay for their mortgage interest.
We have long urged the Government to make improvements to the scheme, including most recently when our Chief Executive Joanna Elson gave evidence to the Treasury Committee. Until now, people seeking help under the scheme were subject to a nine month wait and were ineligible if they had any income at all from work. We were pleased to see the Government take on board the concerns and proposals for improvement from us and others which will see the wait reduced to three months, and the zero-earnings rule abolished. This should help ensure that more people can access this much-needed help in the difficult months ahead.
Read our press release responding to the Autumn Statement.
Harriet is the Money Advice Trust's Senior Policy and Communications Officer. She joined the charity in January 2020, having previously worked as a Parliamentary Researcher and Communications Officer. View all posts from Harriet Dines.