Jeremy Gates sees how payday loans are a possible option for anyone, of any income, finding it tough going

WHILE the plunge in mortgage rates eased millions of households through the financial crisis after the global meltdown of autumn 2008, balancing the books for many families could get much trickier from now on.

Broadly, expenditure is set to rise, while many people’s income will struggle to keep up. In many cases, incomes will fall as the Government cuts public spending.

According to Kelkoo, a shopping comparison website, a likely VAT rise to 20% in the emergency Budget on June 22 would pump an additional £11.4bn into barren Treasury coffers, but it would cost £425 per year for each of Britain’s 26.2m households.

That’s £181 for every man, woman and child in the UK.

For consumers, says Kelkoo, higher VAT means petrol rising by 2.5p per litre, cigarettes by 12p per pack and a pint of lager or glass of wine by 7p. Economic growth would fall from 1.25% to 0.75%, while the Consumer Price Index (CPI) would receive a healthy kick and 47,000 jobs could go in the retail sector as spending tails off.

Bruce Fair, Kelkoo managing director, says: “A VAT increase raises Government revenues significantly, but consumers are left facing an increase in the price of everyday goods at a time when salaries generally are being frozen and the overall tax burden is increasing.

“The combination of lower disposable incomes, and a reluctance to increase borrowing in the current economic climate, is likely to result in lower levels of spending.”

Looking forward, interest rates must rise – possibly in late-2010. Investec Bank reckons one in three savers dipped into cash reserves in the past six months, while the website Moneysupermarket.com says five million people admit to regularly using a credit card to pay household bills.

A further 2.5m people withdraw cash on their cards, potentially costing £90m a year in fees because cash transaction APRs usually top 20%.