SPRING STATEMENT: Focus on stability and growth – consumer credit reaction

The Chancellor, Rachel Reeves, has delivered her Spring Statement outlining the Government’s economic plans.

Responding to the announcement, David Postings, Chief Executive of UK Finance, said “The chancellor’s Spring Statement focused on stability and growth in the UK. We welcome the government’s continued commitment to growing the economy and the financial services sector is committed to playing its part in support. Building on recent positive regulatory reform plans, we now look forward to the upcoming Industrial Strategy, which will be key to unlocking further investment and delivering growth through various sectors, including financial services.”

Steve Vaid, Chief Executive at the Money Advice Trust, the charity that runs National Debtline, said “The unexpected cut to the Universal Credit health element for new claimants risks pushing more people facing health issues into financial difficulty in future. Around half of people receiving Universal Credit who we help at National Debtline already have a negative budget, meaning they don’t have enough money coming in to cover their essential costs, like food and household bills. In light of this announcement, it is likely that we will see more even more people coming to us in this predicament.

“With households due to be hit next week by rises in energy, water and council tax bills, the Chancellor’s statement was light on help for people whose budgets are already at breaking point. Instead of these cuts, we need to see the introduction of an energy social tariff and increased council tax support to help lift the pressure on households on the lowest incomes.”

Richard Lane, Chief Client Officer at StepChange Debt Charity, said “Our research shows that people who rely on support like PIP to cover the additional costs of disability are more likely to struggle with debt problems. YouGov polling we commissioned found UK adults receiving adult disability benefits (15%) are twice as likely to be in serious problem debt compared to the wider population (8%). PIP is designed to recognise these extra costs, so it’s vital that the government ensures people with disabilities or health conditions can access the financial help they need.

“While we welcome an increase in UC payments so that the social safety net keeps up with the cost of essentials, it should not come at the expense of cutting support for some of the most vulnerable. Current plans will result in a significant net reduction in social security spending by 2029/30 – that’s not the direction we want to see.

“Unaffordable debt deductions from benefits also drive real hardship and the government could take further action in this area by limiting deductions for UC advances and overpayments to 5% of the standard allowance. However we need long-term solutions, which is why we are calling for a Minimum Income Commission to provide independent advice on setting benefit levels.

“Finally, it’s important to remember that moving into work doesn’t always protect people from income shortfalls or problem debt, especially for those with disabilities or health conditions who face additional costs. Six in ten StepChange clients are in work, highlighting the need for a benefits system that provides genuine security.”

Simon Webb, Managing Director of capital markets and finance at LiveMore, said “The Spring Statement may have been a missed opportunity, but that doesn’t mean we stand still. If anything, it reinforces the need for the industry to take the lead in driving change for mid-to-later-life borrowers, many of whom struggle to access suitable mortgage products despite being financially responsible.

“We know the challenges – rigid affordability criteria, a lack of mortgage flexibility, and a tax system that discourages downsizing. While government support would have helped, the sector has the expertise and capability to push forward regardless. By investing in innovation, improving digital infrastructure, and modernising lending criteria in line with today’s financial realities, we can break down barriers and provide more options for later life borrowers.

“Collaboration will be key. Lenders, brokers, and policymakers must work together to make the later life mortgage market more accessible. Expanding mortgage flexibility, streamlining application processes, and developing new products that better reflect later-life incomes are all within our reach.”

Melanie Spencer, Sales and Growth Lead at Target Group, said “Much to the dismay of the mortgage market and the wider housing sector, there was nothing really earth shattering to come out of today’s statement. It was interesting to see the OBR predict that the Government will come close to its housebuilding targets by the end of the parliament, although we still lack any further updates on how potential borrowers will be supported in buying these properties. In just one measure, it would have been great to see changes to the Lifetime ISA to make it fit for purpose in today’s climate and property market.

“The same is also true for measures to help speed up the homebuying process, with no further progress announced – leaving lenders, platform providers and technology firms to do much of the heavy lifting.

“As announced prior, the Chancellor focused on reforms to the welfare system, all while aiming to cut some of the fat to make the government leaner and more efficient. She confirmed the use of AI tools to help modernise the state. Given that we have already seen examples of bias within government AI systems – ones detecting welfare fraud no less – the government will have to tread the same careful line as financial services when implementing AI systems and make use of key partners and integrations to deliver innovation and efficiency while minimising risk.”

John Phillips, CEO of Spicerhaart and Just Mortgages said “With the backing of the latest OBR forecasts, the Chancellor lauded housebuilding figures that the OBR predicts will be at a 40-year high by the end of this parliament – with 1.3 million homes putting it in ‘touching distance of its target’. If this is achieved – and it’s a big if – this would clearly be fantastic news.

“It was good to see further funding earmarked for affordable housing, as well as additional funding for the next generation of construction workers – although both were announced in advance. Today’s statement really offered nothing new and once again demonstrates the clear disconnect within government between supply-side measures and tangible action and support to actually address affordability challenges faced by potential buyers in today’s housing market. We have long called for greater support – such as equity loan schemes or for existing schemes like Shared Ownership – to help people buy and ultimately support demand for new houses.

“The housing market plays a critical role in driving economic growth. While increasing supply is absolutely critical, we need measures now to give buyers the ability to buy – not just to enable people to achieve their homeownership goals, but to give the economy the adrenaline shot it needs.”

Paul Mason, CEO of Lantern, said “Today the Government confirmed a raft of welfare cuts, such as cutting the health element of Universal Credit, which will hit society extremely hard. The risk is that those who are on benefits and already struggling with their debt will see their financial situation put under even more pressure.

“At a time when the cost of living and volatile interest rates are already crippling many, a collaborative, empathetic approach between the public and private sectors is needed to tackle the personal debt crisis head on.
“Anything but this approach will see problem debt exacerbated for many people up and down the country.”

Sebrina McCullough, Director of External Relations at Money Wellness said “We see first-hand how financial pressures are affecting people across the UK. While today’s Spring Statement included some positive measures – such as the Office for Budget Responsibility (OBR) forecasting that households will be £500 a year better off- rising bills are expected to offset these gains within 12 months. Households can check to see how much their bills will increase from 1 April on our free calculator.
“At the same time, there was no extension to the Household Support Fund, which is due to end on 31 March. This fund has been a crucial lifeline for many struggling families, and its removal could leave some without urgent financial support.
“Universal Credit (UC) will increase from £92 to £106 per week, but this change will be phased in over four years. For many struggling households, this may come too late to provide the immediate relief they need as living costs continue to rise.

“Reforms to Personal Independence Payment (PIP) have raised concerns among claimants, with many seeking urgent advice on what the changes could mean for them. We’ve seen a significant surge in people looking for help. Analysis of our data shows that interest in PIP and the number of people seeking advice have more than tripled in recent days.
“With the cost of living pressures still affecting households, ensuring people have access to clear guidance and financial help is more important than ever. We’ll continue to provide free advice and support to anyone worried about these changes and their financial situation.”