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We have already seen quite a few ‘pre-nouncements’ about the contents of tomorrow’s Autumn Budget and Spending Review. We will have to wait to see if Rishi Sunak will pull any rabbits out of the hat, as Chancellors are wont to do at budget time. But, one thing is known: millions of households are already facing a ‘cost of living’ crisis.

It is not all bad news. On the positive side of the household balance sheet, wages in certain sectors of the economy have bounced back from the Covid economic crisis. Moreover, an increase has been announced in the National Living Wage for over 23 year olds from £8.91 to £9.50 an hour. The National Minimum Wage for 21-22 year olds will rise from £8.36 to £9.18 an hour, with the Apprentice Rate increasing from £4.30 to £4.81 an hour. Similarly, the end of the pay freeze for public sector workers has also been announced. Although these increases will not take effect until next year.

However, there are concerns that these positive measures will not be enough to offset the negative pressures on household finances. And these pressures have been building up. The end of furlough saw the removal of an important financial support for many households. We have seen huge spikes in energy prices, and a more general increase in inflation. The cut in Universal Credit is expected to hit vulnerable households very hard, and there is the rise in National Insurance coming in April next year.

These pressures can already be seen in the rise in the number of households in arrears since Covid hit. To be sure, many households have been able to save more as Covid restrictions meant they were spending less. But recent research found that the number of low-income households in arrears has tripled, four in 10 working-age low-income households fell behind on their bills, and millions are behind on rent and bills and have had to take on new borrowing. There has been a real disparity in the financial experiences of different households.

Trusted, timely, publicly available data will be important to help us understand the situation facing households and SMEs as the economy recovers from Covid. Registry Trust is the non-profit organisation which maintains the Register of Judgments, Orders and Fines. County Court Judgments (CCJs) are an important real time indicator of financial vulnerability (and of creditors’ attitudes towards financially vulnerable people and the effectiveness of consumer protection measures). Our most recent data suggests that the number of CCJs registered has been rising rapidly as critical measures designed to protect households from the economic effects of Covid (such as forbearance) were removed.

The issue now is whether the cost of living pressures will outweigh the income gains and cause judgment numbers to continue to rise. And it’s not just households, increasing tariffs and other factors impacting businesses could also lead to more commercial CCJs. Our recent data analysis suggested that commercial CCJs are a warning sign for commercial insolvencies, which are also on the rise.

It doesn’t seem that long ago since we faced the great financial crisis of 2008. Looking at the available research, the finances of many households hadn’t fully recovered post 2008 before the shock of Covid hit. We have made little progress on promoting financial resilience and inclusion post 2008.

When we analysed the post-2008 recovery through the lens of our data, what stood out was the contrasting experiences of different households and businesses across the country. The granular nature of our data allows us to highlight how these experiences varied not just between regions of the UK but within regions, and between local authorities.

Households and businesses went into the Covid economic crisis with very different levels of financial resilience. As mentioned, many households were cushioned from the financial shocks and were even able to put significant savings aside. The experience for others was very different. Low levels of financial resilience meant they were exposed to the new financial shocks delivered by Covid.

We now face a double challenge helping households and small businesses repair their finances post Covid and build financial resilience against future economic shocks – which will come. Can we learn the lessons from post 2008 and apply more effective interventions to repair finances? As I discussed in this blog back in March 2021, what we don’t want to see is a ‘two-track’ recovery that increases inequality.

The most effective policies are well-targeted policies. Trusted, timely public data will be critical if we want to expose where the problems are. We believe that our ‘public data for public good’ can shed light on the current, past, and potential future economic situation which can then be used to inform and guide effective policy-making. Trusted, timely public data can help us identify whether policies are working, whether the recovery is being shared evenly – useful also for the Government’s important ‘levelling up’ agenda.

So, what can be done from a Registry Trust point of view? Registry Trust data can provide insight into levels, patterns and distribution of monetary judgments. But, if we also had access to claimant data (something we’re campaigning for), we could help to identify where the problems are stemming from. Secondly, simple, effective interventions to ensure that those with CCJ debts are able to deal with them effectively, quickly and thoroughly, including going through the formal process of getting them marked as ‘satisfied’. This requires better public education and support, including through the availability of quality debt advice. See this previous blog for more info on this.

We stand ready to help. Find out more about working with us in our downloadable e-brochure.

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