BUDGET 2024 – consumer credit sector reaction

Chancellor Jeremy Hunt has announced the Spring budget for 2024. Commenting on budget, Richard Lane, Chief Client Officer at StepChange Debt Charity, said: “It’s encouraging to see a six-month extension to the Household Support Fund (HSF) announced today, but it’s questionable how much things will improve in that time, especially considering two in five people are currently struggling to keep up with household bills and credit commitments. Our advisors regularly speak to clients struggling to meet even the most basic needs, like getting a healthy meal and keeping the heating on. Local support funded by the Household Support Fund are a crucial lifeline for them.

“Increasing repayment times from 12 months to 24 months for Universal Credit (UC) budgeting advances will improve affordability for those struggling to make ends meet. However, we know that millions of people receiving UC are still subject to unaffordable deductions from their benefits to repay other government debts and more will need to be done to end unaffordable UC deductions that can all too often cause real hardship.

“We are particularly pleased to see the announcement that the application fee for Debt Relief Orders (DRO) will be scrapped and this will be remove a real barrier to those seeking support with problem debt. When already facing financial hardship, fees to access solutions can be prohibitive in getting back on track and rebuilding financial security.

“Today’s announcements are steps in the right direction, but further reforms are needed to reduce essential costs like council tax and energy. We have called on the Government to commit to introduce an effective council tax support scheme and develop a social tariff for energy as soon as possible.”

Sebrina McCullough, Director of External Relations at Money Wellness said “We’ve consistently advocated for the eradication of the £90 administration fee for debt relief orders (DROs), as it was preventing some of the most vulnerable in the UK getting the debt relief they so desperately need.

“DROs are often suitable for people who owe less than £30,000, don’t own their home, have few assets and little or no spare income, so finding the upfront £90 administration fee was a big ask. Our research indicates that the fee prevents 44% of those eligible from accessing this solution.

“We warmly welcome today’s change. And the extension of the Household Support Fund is much needed too. It plugs a gap for those struggling with living costs and makes sure millions aren’t forced deeper into poverty.

“We’re helping around 1,000 people a day – demand is unprecedented and is growing month on month. Energy debt and priority arrears are at an all-time high, and bills are still very high. There’s no respite for households from cost-of-living pressures and the Household Support Fund provides a vital safety net for millions.”

David Postings, Chief Executive of UK Finance, said “This is a Budget that rightly continues to focus on delivering growth and supporting businesses and households across the country, key priorities for the financial services industry. SMEs are the backbone of our economy, and we therefore welcome the new Growth Guarantee Scheme, ensuring these businesses can access the funding they need to invest and grow.”

Dame Clare Moriarty, Chief Executive of Citizens Advice, said “Today the Chancellor supported people in the most dire situations by abolishing fees for Debt Relief Orders. These unaffordable fees have priced people out of getting the support they need as 9 in 10 people with a DRO struggled to pay the upfront cost. The Chancellor’s action is very welcome and will mean more people can find a way out of debt.

“But we’re expecting this year to be just as tough, if not worse, than the last 18 months for many. Millions of households are living on empty and simply can’t afford to heat their homes or put food on the table.

“While it’s also welcome that the Household Support Fund has been extended by six months, this is only a temporary fix. We need to see a longer-term commitment to ensure this vital fund doesn’t abruptly dry up in the future.”

Robin Fieth, CEO of the Building Society Association said “We are extremely disappointed that the Chancellor has not taken the opportunity today to announce any support for first-time homebuyers.

“Small changes to the Help To Buy ISAs (HTB ISA) and Lifetime ISAs (LISA) schemes, to ensure they remain relevant and continue to provide the support they intended to provide when they were launched could have gone some way to help.

“By failing to announce a reduction in the Lifetime ISA (LISA) withdrawal penalty, savers who open accounts in good faith will continue to be financially penalised if, for whatever reason, they cannot meet the specific requirements of the scheme³.

“The Chancellor has also missed the opportunity to review the price thresholds on LISAs and HTB ISAs to reflect higher house prices, and to equalised price thresholds on the two schemes.

“These small changes would have made the savings schemes fairer and more appropriate for today’s new homebuyers.“

David Cheadle, Acting Chief Executive at National Debtline, said “This Budget contains welcome help for people in debt, but a longer-term plan is needed for struggling households.  

“The Chancellor’s changes to Debt Relief Orders – something we have long called for – will make a significant difference for many struggling households. By removing the fees for these, alongside other eligibility changes, many more people will be able to access this vital debt solution. 

“The six-month extension to the Household Support Fund is welcome and will provide an ongoing lifeline to people most in need. However, it is only a temporary solution. And with energy arrears at record levels, and council tax increases on the horizon, a longer-term plan is needed to support people in financial difficulty. 

“The Government needs to take action now and introduce a Help to Repay scheme to provide desperately needed support to people trapped in energy debt, alongside reform of council tax collection rules to ensure people aren’t pushed further into debt.”  

Neil Kadagathur, CEO and Co-Founder of Creditspring, said“The extension of the Household Support Fund is a welcome lifeline for millions of struggling households across the UK – the onus is now on local councils to do more to boost awareness and simplify the application process.

“Our recent research found that, with just weeks to go before the scheme was due to close, £85m remained unclaimed, with dozens of councils sitting on over £1 million in support whilst vulnerable people in their communities have been struggling to pay bills. There is an opportunity to learn from the challenges of the previous Household Support Fund schemes and ensure there is greater effort to identify vulnerable people and proactively reach out to provide financial vital support and prevent people from being forced to turn to turn to high-cost credit products, or predatory lenders in order to survive.”

Katie Pender, Managing Director of Target, said “There are some rays of spring sunshine in today’s Budget. The Chancellor’s reduction in the higher rate of property capital gains tax may help the market by generating more transactions. Surprisingly, though, there is no specific help for the first-time buyer although the Budget does contain measures that could indirectly help with affordability. These include the abolition of stamp duty relief for people buying more than one property, and scrapping tax breaks which make it more profitable for second homeowners to let out their properties to holidaymakers rather than to long-term tenants to rent.  However, the Chancellor’s support for tech is welcome, including potential reforms to unlock more pension capital and make it easier for pension funds to invest in the UK. With the mortgage industry under increasing pressure to deliver wholly digital experiences, the latest technology is essential to speed up decision-making and improve customer satisfaction.”

Andy Mielczarek, Founder and CEO of SmartSave, a Chetwood Financial company, said “Cutting NI will be celebrated, but we cannot escape the limited effect it will have. Someone on a salary of £30,000 will only get an extra £348 in their pocket annually thanks to the change, which will do little to reverse the impact of rampaging energy bills, food prices and living costs over the past two years.

“We should not be overly critical; the Chancellor does not have a bottomless pot of funds to allow for huge sweeping tax cuts. Instead, though, it would have been good to see a greater focus on policies and reforms that could empower people to effectively save, invest, and achieve their financial goals.

“Steps need to be taken to simplify and incentivise savings. There is also a pressing need for better education and support when it comes to financial planning, helping people to better assess the wide variety of savings products and providers available to them. Tax cuts need to be bolstered by greater investment into schemes that protect and serve consumers as they make financial decisions.”

Carl Parker, National Director at Just Mortgages, said “It is really disappointing that we didn’t see much in the way of support for the housing market – particularly for first-time buyers. While tax cuts should in theory keep more money in people’s pockets, sticky inflation and sustained cost of living pressures still make it much harder for people to save the necessary deposits and meet tougher affordability requirements.

“Given the government’s position in the polls and with an election on the horizon, it seemed like a great opportunity to bring back Help to Buy, or something similar that includes second-hand homes. Like the scheme or not, it worked wonders in getting people onto the property ladder. Lenders loved the scheme and stand ready to dust it off once again – so did developers who couldn’t move fast enough to meet demand. Let’s not forget the healthy profit made by the Treasury too.

“Changes to capital gains tax have been introduced to increase transactions, although it’s unlikely to sway those portfolio landlords invested in property for the long-term. It could push many of those amateur or accidental landlords hit hardest by increasing rates and costs to dispose of properties. Whether this will boost supply where it is actually needed is still up for debate, with the more likely scenario being increasing supply pressures in an already stretched rental market.

“We can take encouragement from the OBR forecast that inflation will fall below the two per cent target within months. This positive news should support the argument for the Bank of England to finally making cuts to the base rate. This should bring some heavy lifting to the efforts of lenders to improve mortgage rates and will of course have a positive impact on affordability too.”

Independent Age Chief Executive Joanna Elson, CBE said “Today’s Budget was a missed opportunity to help those in later life already living in financial hardship and address the incoming pensioner poverty surge. Cutting National Insurance won’t help the more than 2 million older people living in poverty, or the many more living with precarious finances struggling to make ends meet. Transformative change is needed to improve their lives.  

“While the lower energy price cap and the increased State Pension are welcome, there is still a long way to go for older people in financial insecurity to be able to afford even the basics. Bills are still astronomically high, and our helpline hears daily from older people rationing themselves to just one meal a day and washing in cold water to save energy.  

“The cost-of-living payments have ended and older people in financial hardship are already at breaking point. While the temporary extension of the Household Support Fund is welcome, long-term solutions are needed to protect them from high household costs. The UK Government needs to introduce a single energy social tariff and water social tariff. This would help shield people of all ages living on a low income, including older people, from high and unmanageable costs. 

“Today, the UK Government reiterated its commitment to uprate Pension Credit, but it must now implement a strategic and targeted plan to get this money into eligible pockets. As the latest figures show that up to 880,000 households missed out, an uptake strategy is urgently needed to target those who need financial support but aren’t aware it exists or don’t know they are eligible.  

“Pensioner poverty has been steadily rising since 2012. Sadly, nothing announced today will reverse this alarming trend. That’s why we need a cross-party review to establish an adequate minimum level of income needed to avoid poverty in later life. Until that happens, we risk seeing more older people fall into financial hardship.”