As inflation hits its highest rate for 40 years families are going into debt to pay for basics like food and fuel, a credit union has warned.
Consumer Prices Index inflation, the rate at which prices are rising, rose to 9% in the year to April, up from an already high 7% in March, the Office for National Statistics said.
The Cambrian Credit Union says it has seen a surge in applications to borrow money - not for treats like holidays or luxuries but for everyday essentials.
Prices are rising rapidly and it's pushing more low and middle income households into hardship. The credit union, which is owned by its members, says more people are looking to consolidate their debt in order to have some disposable income.
Ann Francis, General Manager of the Cambrian Credit Union which helps people save and provides loans, says people have seen their disposable income hit hard.
"People are coming in for top up loans. Many were already finding things difficult after the £20 uplift in Universal Credit was scrapped. They are now borrowing to cover basics", she said.
Those who earn the least spend a higher percentage of their income on the essentials like food, heating and fuel. Electricity bills nearly doubling and food prices expected to rise by 15% in a year means budgets are stretched and affordability is limited. Basically, people have less money to spend.
The Chancellor, responding to today’s ONS inflation statistics for April, said: “Countries around the world are dealing with rising inflation. Today’s inflation numbers are driven by the energy price cap rise in April, which in turn is driven by higher global energy prices.
“We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action.
“We’re saving the average worker £330 a year through reducing National Insurance contributions, changing Universal Credit to save over a million families around £1,000 a year, and providing millions of families with £350 each this year to help with their energy bills.”
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An estimated £12billion could be wiped off discretionary spend in the UK over the next year as everything from rents to mobile phone bills and National Insurance contributions go up.
National Insurance payments went up in April from 12.5 % to 13.5%. A typical family in Wales will pay an extra £112 in National Insurance contributions this year.
More people are having to decide where to save, and those on lower incomes have less financial headroom.
The worry for the economy now is whether low growth and high prices will plunge us into recession - the last scenario businesses and households need as many recover from the pandemic.
The Cambrian Credit Union says it is really important for people to ask for help and there is assistance available. Both the UK and Welsh Government have support packages in place.
However the Welsh Government says many families are not claiming all the help they are entitled to. It's encouraging families to check what help is available and advising people to contact their local credit union or the CAB Cymru.