BUDGET 2024 – consumer credit sector reaction

Chancellor Rachel Reeves has announced the autumn budget for 2024.

Commenting on the announcements, Steve Vaid, Chief Executive of the Money Advice Trust, the charity that runs National Debtline, said “There was some good news in this Budget for people struggling with problem debt.  Reform of Universal Credit debt deductions is long-overdue, and the Household Support Fund extension will mean more help for people at the sharp-end of financial difficulty.  

“But the Budget also introduces new pressures. We remain concerned about the impact of the removal of the Winter Fuel Payment from pensioners lower down the ncome scale. And there was no help on energy arrears, which are now at £3.7 billion.  

“With energy prices so high, more and more people are at risk of falling behind. The Government and Ofgem need to bring forward a Help to Repay scheme to bring down energy debt, and introduce an energy social tariff to reduce bills for those on the lowest incomes.” 

Adam Butler, Public Policy Manager at StepChange Debt Charity, said “Unaffordable deductions from benefits are a huge driver of hardship in the benefits system, pushing over nine in ten of those affected to go without essentials. StepChange has been campaigning with sector partners for years to see deductions drastically reduced and the Government’s announcement will make a massive difference to those affected.

“StepChange research shows more than one in four people (27%) receiving Universal Credit are struggling with serious problem debt. Overhauling the deductions system will help people meet their essential costs like housing payments and reduce debt problems.

“We warmly welcome the Government signalling its intention to make real progress in tackling child poverty and taking concrete steps to increase household incomes among those most at risk of poverty and hardship.”

Richard Lane, Chief Client Officer at StepChange Debt Charity, said “It’s hugely welcome that the government is taking action to reduce unaffordable deductions from Universal Credit (UC). StepChange has campaigned alongside sector partners on this issue in recent years and last year gave evidence to the Work and Pensions Committee highlighting the problem.

“Our recent polling shows that those on UC (35%) are almost four times more likely to be behind on at least one essential bill compared to the wider population (9%). In this context, unnecessary debt deductions inevitably cause hardship, leaving vulnerable households to go without essentials or turn to credit to cope. Over nine in ten StepChange clients affected report deductions have caused them to go without essentials.

“It’s also welcome that the Household Support Fund will be extended, which is a vital lifeline to those experiencing financial distress. In the long term we’d like to see the government implement an effective and permanent local crisis support scheme.

“While these measures are encouraging steps to increase incomes for those most at risk of poverty, we hoped the Chancellor would go further by scrapping the two child benefits limit and benefit cap, which particularly hit low income families. Almost half of our debt advice clients are parents, and single parents in particular are overrepresented, for whom financial pressures have only intensified over the past few years.

“We’re concerned to see a lack of intervention on energy debt and affordability as thousands of households continue to struggle to repay energy arrears, and stay on top of rising bills as we approach winter. Energy bills, along with council tax, put a heavy burden on low income households, with reform in both areas desperately needed to address affordability issues.

“However, the announcement of a rise in minimum wage is welcome and will be beneficial in helping people to build financial resilience and ensuring that work pays. Younger adults who face low and insecure incomes can be particularly vulnerable to problem debt, and a higher increase for younger age groups—a step towards the Government’s commitment to introduce a single adult rate—will help to close that gap.”

David Postings, Chief Executive of UK Finance, said “The Chancellor’s Budget today focused on investment and economic growth, areas in which the financial services industry plays a critical role.The UK has a significant shortfall of homes and we welcome commitments to increase the supply of new housing, as well as the support being provided to help green the housing stock.

“The financial services sector provides high-skilled jobs across the country. As our recent tax report highlighted the sector is a significant contributor to the exchequer, including through employment taxes, which will increase as a result of the National Insurance changes.”

Melanie Spencer, Sales and Growth Lead at Target Group, said “In her maiden Budget, the Chancellor reaffirmed the Government’s plans to get Britain building. This is essential and will hopefully in time help to answer a real shortage we are seeing in the housing market. What was lacking though was support for potential buyers and those looking to move now.

“While capital gains tax did remain unchanged for residential properties, the increase in stamp duty for second homes will have caught many landlords by surprise. While there’s an argument to say this will give first-time buyers less competition from investors, there is real concern around the ramifications for the private rental sector.

“With increases in supply forming a key part of plans, as well as changes to stamp duty and taxation, there’s no question that lenders and all parties across market need the right technology and systems in place to meet demand and streamline the house buying process. With a lack of real support to help buyers today though, technology will continue to play a role in helping lenders to innovate and venture into new product offerings, to help better serve consumers and keep the market moving in lieu of immediate and tangible government support.”

Simon Webb, Managing Director of capital markets and LiveMore, said “The new Budget has introduced significant changes with potential implications for older borrowers, particularly those aged 55 and over who may be considering property purchases or equity release options to support their retirement. The Chancellor’s focus on stability and growth in public finances, coupled with increased support for affordable housing, sends a clear message about the Government’s commitment to addressing long-term economic challenges. However, for those nearing or in retirement, the adjustments to Stamp Duty and Capital Gains Tax will add an extra layer of consideration when planning for later-life financial stability. These changes may lead many older borrowers to rethink their property investments or inheritance strategies, especially with additional financial pressures on second homes and buy-to-let properties.”

“Lenders now have a responsibility to offer clear, bespoke guidance to help this demographic navigate the new fiscal landscape. With the cost-of-living still impacting many over 55, a focus on providing transparent, responsive solutions will be critical in empowering older borrowers to make well-informed decisions about their financial futures amidst the evolving market dynamics. Tools like LiveMore’s Mortgage Matcher® can help intermediaries navigate the over 50 market more effectively, ensuring they find solutions that suit their specific client’s circumstances.”