Debt could rise due to high unemployment

25/01/2010

Debt problems may be more widespread than originally thought as the true toll of the recession on employment becomes clear.

The Chartered Institute of Personnel and Development (CIPD) has released a report detailing that 1.3 million people lost their jobs during the UK's recession, a figure almost double the number of people who became officially unemployed.

Today's numbers are much higher because they include people who were made redundant and then found themselves another job.

Although these people became reemployed, two-thirds took on another job which offered an average of 28 per cent less pay than their original post.

Dr John Philpott, chief economic adviser at CIPD, said: "Although the scale of job loss in the recession is much less than originally feared and much less than might have been expected given the scale of the contraction in the economy, it is evident that the direct experience of redundancy, repeat spells of unemployment and pay penalties has nonetheless been widespread."

Despite bleak figures from the CIPD, employment minister Jim Knight claims that there are "450,000 fewer people currently unemployed than predicted last budget".

Kevin Still, EuroDebt director, commented: "CIPD's report confirms EuroDebt's findings that 'loss of income' is the top debt reason for people starting a Debt Management Plan, where lost overtime, reduced working hours or a new job with lower pay are primary factors.

"Significant reductions in disposable income mean that priority expenditure like your mortgage, rent, council tax and utilities must come first."

He added: "Many households cannot afford to make minimum contractual payments on their unsecured credit agreements and need to negotiate a debt repayment arrangement, often with the assistance of a debt advisor."

Tags; Job loss,

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