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Claims that cost of living crisis is over are for the birds

by Myles Fitt, CAS Strategic Lean on Financial Health.

This article was first published in The Herald on 30 March 2024.

Readers of a certain vintage may recall the Blackadder joke about feeling like a pelican – because everywhere you turn there’s an enormous bill in front of you.

Yet for hundreds of thousands of people across the country, bills aren’t a punchline but a deadline they keep missing, pushing them into debt and a sense of worry and anxiety.

For the past 6 weeks Citizens Advice Scotland has been running “Stressed About Debt” – a campaign encouraging people to seek advice if they are worried about money and debt.

What we have seen as part of the campaign is hundreds of thousands of people using credit to pay essential bills.

Those large bills kept getting larger, but people didn’t have the income to keep up – so they turned to credit.

What do you think happens next?

Their costs go up, as debt repayments become part of their monthly outgoings. Research we published in the Herald today shows that over 300,000 people in Scotland have missed a debt repayment in the past year. It’s a vicious cycle.

And the problem is growing. CABs dealt with more than £23 million worth of debt from clients last winter. That’s a 25 per cent increase in the value of debt brought to CABs and a 17 per cent increase in people seeking debt advice compared to last year. 

In the coming weeks and months, as inflation slows we may hear policy makers quick to proclaim the cost of living crisis is over – it is nothing of the sort. It’s still inflation. We will be dealing with the fall out of the crisis for years to come. In many cases people’s financial resilience was simply wiped out, hundreds of thousands of people have been pushed into debt or seen their existing debt get worse because bills raced ahead of their incomes. That’s not a trivial part of our economy, that’s consumers with reduced spending power.

Then there is the wellbeing impact. Over 660,000 people say their debt had impacted their mental health, over half a million say it has kept them up at night.

These fears, worries and anxieties don’t disappear simply because inflation isn’t as high as it was or meets a government target.

All across the country CABs are facing increasing levels of demand. The cases are often complex and the people involved are often at crisis point.

Despite this, the results CABs get are staggering. Many people have their lives changed by the advice they receive, whether that is having their incomes maximised so more money is coming in the door, or renegotiating with creditors to make repayments more affordable.

The key thing is to get advice early. The sooner someone gets advice the better their potential options are. But understandably many people feel a sense of shame around debt and put it off. Some people – to return to the bird theme – stick their heads in the sand and do nothing until a trigger point like a final demand for payment or a letter from a Sheriff Officer about debt recovery.

So more people feel like pelicans and behave like ostriches, fewer are able to feather their nests because of soaring bills. 

CABs across the country will be there to help people with their money and debt worries. We know the crisis isn’t over. We need policymakers to understand that too.