Monday, October 03, 2011

A perfect storm?

Much play was made recently of a Greek granny on the street in Athens, begging. At the time, though, I wrote that no one should run away with the idea that such poverty was a phenomenon confined to Greece. And here we have some confirmation that the UK is not very far behind, with the situation markedly deteriorating (above).

But this is not the only sign of distress. We see here a report from the Consumer Credit Counselling Service (CCCS) about notices being sent out by HMRC to an estimated 1.2 million people who paid too little tax last year due to errors in the Pay-As-You-Earn (PAYE) system.

It is predicted, the report says, that this figure includes up to 160,000 pensioners who could face repayments of up to more than £1,000 each. The charity is concerned about the impact of these repayments could have on these pensioners.

Then comes the "money quote" (or lack of money quote). Older people contacting the charity who reached the state pension retirement age during 2010 owed an average of £21,370 in unsecured debt, and had an average of just £85 left over after meeting basic living expenses each month.

The charity's director of external affairs, Delroy Corinaldi, said: "With so little available at the end of each month as it is, these unexpected tax bills could have a serious impact on the ability of some pensioners to repay their debts".

This is but one of the many additional issues that indicate stress points, this report warning of the possibly effects of changes to the Council Tax Benefit (CTB) payments, which are set to increase the number of Council Tax defaulters. And, on top of all that, we see that recent changes to law on the treatment of private sewers are going to have a dramatic effect on next year's water bills – which are already grossly inflated.

Another sign of the times is that the Resolution Foundation think tank is saying that more than twenty percent of workers now earn less than a "living wage, exacerbating the squeeze of the lower earners.

With councils then becoming more aggressive in the collection of Council Tax, and more readily employing fraudulent private bailiff companies, as well as ratcheting up summonses and liability order fees, we may be beginning to see the conditions set for personal debt to reach "perfect storm" proportions.

As fast as consumers cut back debt, it increases elsewhere, despite attempts to rein in spending, with Tescos announcing a fall in UK sales for the first time in 20 years. Stresses are building up in the system from all directions. Something is going to have to give.