Credit and debt

Stephen Chamberlain, Sussex Community Foundation
Stephen Chamberlain, Sussex Community Foundation

A few days ago in an interview with BBC Radio 4’s Today programme, the Governor of the Bank of England, Mark Carney, said it was time for the bank to “ease its foot off the accelerator”.

Despite previous hints, this has been interpreted as the strongest warning yet of an interest rate rise and that the decade-long era of cheap consumer borrowing is on the verge of ending. The current rate of 0.25% represents the lowest cost of borrowing since the bank was founded in 1694.

The Bank’s data shows we are borrowing at a rate nearly five times more than the growth in our earnings. “What we’re worried about is a pocket of risk in consumer debt, credit card debt, debt for cars, personal loans,” Carney said.

Mr Carney isn’t the only one publicly worried. In September, the chairs of two parliamentary committees, Rachel Reeves from the Business Select Committee and Frank Field of the Work and Pensions Select Committee, called for the government to investigate the £200 billion of personal debt we have accrued.

But what’s the situation like in Sussex? At Sussex Community Foundation, we have been supporting organisations working to help those experiencing debt and financial problems since the time of the last interest rate rise back in 2007. Citizens’ advice bureaux have been at the forefront of offering advice to those struggling with debt and have had national successes, for example, with campaigning for more stringent regulation of the payday loans industry. On a local level, we recently gave a grant to Lewes and District CAB to support the work of their debt and welfare benefit caseworkers who see 450 residents a year.

Another group we have supported is Hastings and Rother Credit Union which provides financial services to those on low incomes or who might be financially excluded. They report that full-time wages in Hastings are 82% of the national average and that over 3,200 people are likely to be in problem debt in the town. That’s the kind of debt where an interest rate rise could tip the balance from being ‘just about managing’ to ‘really not managing at all’, where things become unmanageable and mainstream financial services may no longer be an option.

Fortunately, Hastings and Rother Credit Union and others like them around Sussex are able to help. They are a volunteer-led, not-for-profit cooperative, owned by members. They specialise in offering affordable loans, regular savings and pre-paid VISA cards for those on low incomes and who might be excluded by other providers, perhaps because of a poor credit history. Crucially, all borrowers must save first before becoming eligible for a loan. Each year, they help more than 1,700 households to spend, save and budget effectively and more widely to alleviate poverty in the area.

While tiny, compared to the Bank of England, it is organisations such as Hastings and Rother Credit Union who really are mighty in helping local people deal with the implications of national decisions.

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