Budget holds ‘mixed fortunes for borrowers’

In what is widely thought to be his final Budget, chancellor Gordon Brown reduced a number of taxes, notably cutting the basic rate of income tax from 22p to 20p.

However, with charges and rates on a number of other taxes also set to rise, how the Budget could affect the situation of financially-vulnerable Britons who are looking to balance debt management and make personal loan payments has been met with a variety of responses.

Pensioners and families with young children may find their attempts at debt management eased as Gordon Brown cut 2p from the basic rate of tax.

During his 11th Budget, the chancellor reported that his move to decrease income tax by two pence could see some 200,000 children and 600,000 pensioners lifted out of poverty.

However, chief executive of the British Bankers’ Association Angela Knight claimed that although thousands could benefit in the short-term, many consumers could find their ability to make loan repayments squeezed in the future.

She said: "The cut to personal taxation is welcomed but this is likely to be offset by changes to allowances and national insurance."

Ms Knight added that the chancellor’s decision to increase the cash limit of individual savings account from £3,000 up to £3,600 is "welcome because it will allow people to think more carefully about saving".

Citizens Advice spokesperson Rosalind Pearson told the Metro that despite the benefits young families and older people are likely to receive from this year’s Budget, the move could see thousands of Britons, particularly those who do not have families and live on their own, face debt management problems.

Ms Pearson told the publication: "The tax credit situation has left many people severely out of pocket and confused.

"For some, the drop in income has tipped them over the edge into debt, sometimes for the very first time in their lives."

Meanwhile, rising prices of beer, wine, tobacco and fuel duty could also see borrowers’ affordability to make loan repayments tightened.

However, this could be an opportune time to give up smoking as the amount saved from stubbing out one last time could help meet personal loan payments.

Research by Co-operative Insurance stated that quitting tobacco could save Britons some £1,800 over the course of a year.


However, Charles Stanley economist Edward Menashy claimed that despite moves by Mr Brown to reduce taxation, the chancellor is "giving with one hand and taking with the other".

He said: "What should really concern investors is the endless sea of red. I do not see how the nation’s debt burden can be maintained.

"The chancellor can wave his magic wand over taxes, but the national debt never seems to fall."

Those looking to get on to the first rung of the property ladder could also face increased financial difficulties following the Budget, reports the Motley Fool.

Head of personal finance David Kuo claimed that Mr Brown has wasted a "golden opportunity" by maintaining the stamp duty threshold despite increased property prices and home loan costs.

As a result, consumers concerned about their future financial situation and debt management could be well advised to get a low rate personal loan.

Getting a competitively priced debt consolidation loancan help borrowers pay off debts accrued from credit cards and other unsecured borrowing into one monthly repayment.

Interfinancial providing you with breaking debt management news.