Reacting to the budget this year comes with a slight feeling of exhaustion – so many policies had been floated, discussed and publicly ruled in or out even before the chancellor stood up and pulled the details out of her red box. It’s impossible not to feel a degree of sympathy for the situation in which the Rachel Reeves had found herself – trying to perform an economic miracle of simultaneously reducing the country’s hefty debt costs, while also making people feel better off.
So, it’s good that there were at least some very welcome changes announced that will directly help reduce the incidence of problem debt.
Read more:
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- Two-child benefit cap axed and wage hikes: What Rachel Reeves’ autumn budget means for your money
From a debt advice perspective, the abolition of the two-child limit is arguably the most significant budget measure. The government’s own assessment suggests that this measure will lift 450,000 out of poverty. Another way of looking at this is that it reduces the pressure on parents who may otherwise be forced into problem debt to provide for their children. It is a decisive move that will reduce the risk of debt-related harm and ease pressure on thousands of families across the UK. Parents with more than two children, and single parents especially, are hit hardest by debt problems and struggle to keep up with essential bills. In 2024, one in 10 StepChange Debt Charity clients (11%) had more than two children compared to 4% of UK households. So, this announcement is warmly welcome.
Less headline-grabbing, but confirmed in the budget documents, is the extension of the Help to Save scheme to more of those with low incomes who do not currently qualify, and putting it onto a permanent footing, something that we’ve been calling for. This is a positive step and one that we are pleased to see, providing a valuable platform towards rewarding saving for those struggling to build financial resilience. The government must now drive up take-up so that as many people as possible can benefit.
Beyond these elements of good news, there are some other aspects of the budget that are less positive, if not unexpected. The budget documents confirm that council tax is expected to rise by a likely 5% in April, yet another hit to households struggling to manage the rising cost of living. We have seen arrears among StepChange clients double since the pandemic. Outdated regulations enable aggressive debt collection practices which exacerbate debt and leave households with little room to repay. The government must act quickly to make the collection system fairer and more attuned to the difficulty millions of households are having in meeting their bill.
