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The middle classes have become the latest victims of the spiralling debt crisis because of “super-inflationary” rises in the cost of living, a leading debt group said yesterday.
The Consumer Credit Counselling Service said that while steep rises in energy and mortgage costs had hit the oldest and poorest hardest, the increases had been so dramatic that even the professional classes were struggling. Experts said that the figures marked a more serious era in the country’s battle with debt because they showed that the problem had extended from borrowers with credit cards and personal loans to all households, irrespective of how much they had borrowed or what they earned.
The gloomy assessment comes as Gordon Brown gave warning that the year ahead was going to be tough and people “are already feeling the pinch with their shopping and fuel bills”.
Writing in The Sun, the Prime Minister nevertheless said that people “know that the Labour Government has got the economy through tough times in the past. And we have taken the tough decisions which will see us through again.” He said that Labour had worked hard to build a record of stability over the past ten years. “And my guarantee to the British people is that we will hold on to that stability in these latest tough times.”
Vince Cable, the Liberal Democrat Treasury spokesman, said of the consumer credit figures: “Following recent sharp rises in repossessions, this is further evidence of a looming crisis in the housing market. Many people are feeling the consequences of huge levels of personal debt.”
Rises in mortgage costs have had a disproportionate impact on higherincome earners because they spend more of their disposable incomes on property, the counselling service said. It found that this group now spends 44 per cent of their net salary on their rent or mortgage, up from 34 per cent five years ago; households below the poverty line spend 8 per cent. The figures came after Citizens Advice Bureaux reported a 35 per cent increase in inquiries from homeowners worried about paying the mortgage.
Experian, the credit reference agency, published a debt map of Britain yesterday, giving a breakdown of how much towns and cities owe. Residents of Chester-le-Street have borrowed the most on credit cards and loans, with an average amount outstanding of £5,248. Borrowers in Northern Ireland owe the least, with an average of £2,291. Experian said that mortgage balances had grown the most in areas that had experienced the highest house price growth in the past 12 months, such as Northern Ireland, Kensington & Chelsea and Wandsworth.
The average fuel bill has reached more than £1,000 a year after recent price rises by energy companies, while the average home loan went up by almost £9,000 between 2006 and 2007, from £118,536 to £127,039, the Council of Mortgage Lenders said.
Credit Action, another debt charity, said that second-home owners and older people who had taken out equity from their homes to help to fund their retirement were at particularly high risk from rising living costs, because of their exposure to the downturn in the property market as well as more expensive mortgage rates on these deals.
Chris Tapp, the director of Credit Action, said: “This is a new era for the UK’s debt crisis. Previously, debt problems were confined to people with credit cards and loans. Now, everyone is struggling with essentials, such as utility bills and mortgages.”
The counselling service said that the profile of those asking for help was becoming “older and poorer”. For the first time it found that customers over the age of 60 had the highest level of debt, at £29,642. The inflation rate for people over 75 is now 3.4 per cent, compared with an official inflation rate of 2.5 per cent, according to Alliance Trust, the investment group.
Other research showed that an increasing number of desperate homeowners are resorting to dangerous measures to get out of debt. In the past three years 6.5 million mortgage borrowers have lumped separate credit card and personal loan debts into one, according to Moneyexpert.com .
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Not exactly middle-class,more aspiring upper working class. Two kids at uni, one no longer at home. Combined tuition fees £6300, cost of halls £3700(he's in Nottingham)... but we don't care,we don't worry, they can both take out student loans, absolving us from the onus of parental responsibility... thank you new labour, how could we every manage without you. Education, Education, Education
Douglas Miller, Fulham,
I thouhgt our Premier reckoned we were not going to be sucked into the sub prime problem only a few months ago and carry on spending. As for his puppet (Darling) I reckon he lives on another planet,
He hasn't a clue.
William, Sevenoaks, England
I disagree with every point in the quote from Gordon Brown.
Labour was at the helm when recovery from the recession of the nineties began bearing fruit and they took the credit, but it wasn't down to them.
Since Labour has been in power we have not had 'stability', we have had increased volatility which has been balanced out across various different sectors.
It is only now as the trends are alligning that the public can no longer be hoodwinked.
Thomas, London,
Energy costs are continually being mentioned as being a significant problem. Rarely, if ever, have I seen any reference to the cost of kerosene which is often the preferred choice for those in predominantly rural areas not served by mains gas. The cost of this fuel has more than quadrupled in 9 years. In early 1999 this could be bought for 10 pence per litre, it is now about 50. How inflation can be considered to be 3% or so beats me. For many people a warm house in winter has become something of a luxury.
Rikki Tikki-Tavi, Lichfield, England
The fuel bills would be easy, The government could cut vat on fuel bills and stop the big business's profiteering from us Oil is valued in dollar's but given the rise of the pound against the dollar, then petrol prices shouldn't have risen so much.
If the government really care's for the people rather thn the big business it's really in bed with then it could act to sort out those issue's now. We are wasting millions in iraq and afganistan a day, but not looking after our own people. It is utterly utterly ridiculous.
charles blake, london, uk
Nu-Labour/Old Labour same old thing, spend, spend, spend, taxes (Indirect stealth taxes) go up, so does inflation, the only ones snug are the growing public-sector workforce.
Trouble is youre preaching to the converted on here, I bet Labour voters will still blame the downturn and credit-squeeze on the yanks and vote Labour in again.
steve, west midlands, uk
How can inflation be approx. 2-2.5% with such high energy prices, council tax bills, petrol price increase of appros 10% in 9 months!!!!
This is a fiddle to keep index linked pension increases down.
Its a hard struggle for pensioners!!!
Harry, Northolt.
H.S.Meswani, Northolt,
Yes, us middle classes are barely struggling to buy our next bottle of Viogner. We can hardly pay for our two holidays a year.
C'mon people. Complaining about money if you ain't broke is ugly, ugly, ugly. Tax is not that much higher percentage wise than it ever has been (take off your rose tinted specs and check it out), or hugely different across the western world, apart from obvious differences like Switzerland or Montenegro.
You are not living in the real world if you think that there is no financial incentive to work. I pay high taxes, I'm happy to work harder and pay more, because the wider picture shows that it benefits the mass as a whole.
You can't take it with you, my friends.
Ezra Mayo, Oxford, UK
For the government to continue to keep reporting that inflation is 2.5% is the repeating of a lie, they know it, and we know it. Inflation was estimated to be at 9% last year, based on the prices we pay for items which are important in life such as food, water, gas, electricity, decent clothes not crappy rags from supermarkets.
We also are forced to pay for retirement pensions for local council staff of which there are many,many millions, this is paid from our empty the bins and clean the drains money known as the Council Tax.
Gordon, anybody with half a brain knows you and your lot like taxing people, its what socialism is good at, at some time the people of Britain are going to explode if your government continues this heavy taxation. Be gone, and don't return, we've all had enough of socialist lies and incompetence.
Phil de Buquet, Newport, England
To all you Labour voters I say this. Continue being an ostrich if you want to but I have decided I am going to switch my vote from Labour ( last 7 general elections) to Conservative. I've had enough of Labour's tax & spend so the Conservatives had better cut taxes and the thousands of useless public sector jobs Labour has created otherwise I won't vote for any party come 2014/15.
Chris, Dartford,
You know you're going downhill when you get ever more laws, bans and taxation, particularly whe they start taxing'fun'.
We need to ditch this lot --- not everybody can work on the public payroll. Someone has to pay for them...an ever decreasing number of hard workers.
Phil, Preston,
Never mind those at work, what about people who have been offloaded in their fifties and because there's no support from the state are having to survive whichever way they can? There are hundreds of thousands of these people.
judy, Liverpool, England
I really did feel I was being taxed to death by Gordon Brown. I made the decision to emigrate to Australia and will not consider returning until Nu Labour are long gone. Gordon gets no tax out of me now. I know so many professional people that have also emigrated, Australia, Germany, US, Canada and France.
Andrew, Melbourne, Vic
We are feeling the pinch too. I find it hard to swallow that the rate of inflation is only 2.5%. Over the last year fuel for heating lighting and transport, and food have gone up way beyond that.
PaulK, THORNTON-CLEVELEYS,
This is part of Labour's master tax plan, to bring the poor out of poverty. The tax burden is and has always been on us for the last 10 years instead of benefiting from low interest rates that money has offset the punitive direct/indirect tax increases and the poor are no better off as fags and beer have all gone up. At least Labour will be happy of capturing another group of people in the social security/benefits trap which will make people beholden to them
steve tea, manchester, cheshire
Britain should adopt the central debt register that they have in some European countries like Belgium. Then this stupidity could not happen in such a widespread way.
Nick Lawrence, Gavere, Belgium
Labour have removed all incentives to work hard, stay married and achieve a good standard of living, working people would be better off giving up their jobs and living off the state recouping a little of what they've paid in.
VJB, London,
The Middle Class have always been the victims. I am sure the chancellor will now think up another tax to be paid mainly by the Middle Classes to alleviate this problem.
Hamad Lone, London, England
There is a danger that thinking poverty is having only one foreign holidays a year, and not affording the latest gadgets, and not having a flash car and endless weekends away. There is always going to be a prcie to pay for encouraging people to spend spend spend. The business cycles are as old as money itself. Personally I think we can still concentrate on building a society that pulls together rather than a mass of consumers who are more interested in interest rates than anything else.
andy anderson, rousse, bulgaria
Labour have taken people through tough times in the past? Gordon, you're the one who has hurt us most with your endless increases in taxation.
martin, reading, UK
In the forces we always said for every fighting man there was 1.5 civil servants on admin, now business, wealth earners have to carry hoards of personnel in non jobs, interferring in the creation of wealth. We have handed over to the self seeking unqualified to make decisions on things they have no experience of. Today there are many MPs who have lived off the state all their lives, and fully intend too carry on doing so.
Wills, Soton, UK
People are already feeling the pinch thanks to excessive tax levels Mr Brown. Council tax is still a larger proportion of my income than fuel costs and is still rising above the level of inflation. If you want to help, stop devoting your effort to claiming credit for (dubious) achievements in the past and instead help us now - cut taxes.
John Scott, London,
Did A kilt wearing fellow once say. "No more boom and bust?"
Or was this just more NuLabour spin?
Mike O Connor, Plymouth,
Inflation feels to be at 9% for those of us not in government. Prescription Charges are not rising at 2% nor are utility bills, Council Tax, petrol, newspapers, food, school fees, or dental costs.
It is clear our living standards are falling absolutely as China advances and that Britain's historic prosperity is entering a secular decline as newer economies advance and replace nations that once-were.
The State claims huge shares of incomes and estates to gorge itself and leaves little for the provident to survive
TomTom, Leeds, England