Scotland’s fightback against the Coronavirus will require a post-pandemic financial recovery plan, with many people still unclear on what their long-term financial future will look like according to new statistics published by The Money Charity.
Previous known as Credit Action, and established in 1994, the Money Charity is the UK’s Financial Capability charity, proactively providing education, information, advice and guidance to people of all ages throughout the UK, helping them to manage their money well and increase their Financial Wellbeing.
As Scotland continues to recover from the pandemic alongside the rest of the UK, the new UK-wide data shows that:
- 61% of self-employed individuals have a worsened financial situation due to the pandemic.
- 4.5m workers in the UK were furloughed in January 2021 as a result of the pandemic. One-third of which have been furloughed for ten or more months.
- A 454,000 increase in the number of people unemployed in the year to December 2020.
- The average total debt per household, including mortgages, was £60,860 and per adult was £32,014, around 107.5% of average earnings.
- People in the UK owed £1,696.4 billion at the end of December 2020.
The Money Charity further reported that based on December 2020 numbers, the UK’s total interest payments on personal debt over a 12month period would have been £44,910 million, an average of £123 million per day. The average annual interest per household would have been £1,611, and per person £848, 2.85% of average earnings.
According to the Office for Budget Responsibility’s November 2020 forecast, household debt of all types is forecast to rise from £2.062 trillion in 2020 to £2.373 trillion in 2025.
This would make the average total household debt £83,308 (assuming household numbers track ONS population projections.)
Consumer Credit Debt
At the end of December 2020, outstanding consumer credit lending was £202.1 billion, falling by £1.4 billion on the revised total for the previous month, and £22.2 billion less than in December 2019. Within the total, outstanding credit card debt came to £58.4 billion, a decrease of 19.3% (£14.0 billion) in the year to December 2020. Credit card debt averaged £2,094 per household and £1,101 per adult.
A credit card on the average interest rate would take 24 years and 10 months to repay, making only the legal minimum repayments (interest plus 1% of the outstanding balance) each month. The minimum repayment in the first month would be £54 but would reduce each month. If £54 were paid every month, the debt would be cleared in 5 years and 2 months.
Citizens Advice Scotland advised The Money Charity that in January 2021, they answered almost 10,000 calls in January 2021 alone, where the enquiry was related to debt. The biggest group was in regards to benefits, which equates to almost 32,000 of their January calls which ultimately, may lead to more longer-term requests for help relating to unaffordable Problem Debt.
A stat that is made more worrying given that CAS currently is facing a fight of its own, as it struggles to find funds that will allow the service to remain open in a face-to-face capacity in areas of Glasgow such as Bridgeton, Easterhouse, Parkhead and Castlemilk.
In January 2021, the Money and Pensions Service predicted that demand for Debt Advice is expected to increase by 61% in 2021.
All eyes both north and south of the border will be focused on Rishi Sunak’s budget announcement later this week when the Chancellor will come under great pressure to elaborate on the country’s post-pandemic financial recovery plan. And, with Scottish parliament elections scheduled for May this year, a similar theme may emerge.
What help with unaffordable debt is available in Scotland?
To find out more about managing your money and getting free advice, visit Money Advice Service, an independent service set up to help people manage their money.
You can also receive free, impartial debt advice from your local Citizens Advice Bureau, Stepchange and other debt charities, as well as tailored debt advice from ourselves, Trust Deed Scotland®
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