People borrowing £660 a month to make ends meet?
With yesterday’s news of a cap on payday loan interest rates coming as a relief to many, George Osborne has been criticised for dragging his feet on the issue and finally delivering too little, too late for many people, especially those choosing between ‘heating and eating’ this Christmas. The Chancellor has specifically been attacked by the UNITE union, who claim more needs to be done, with the average amount being borrowed just to make ends meet in a month topping £660.
And this isn’t just people factoring expensive gifts into a Christmas spend- the independent survey conducted by Mass1 of 4,087 Unite members was undertaken in the week 25-30 August- when higher (and even higher) energy bills were still a dot on the horizon. The results showed people are borrowing £660 per month compared with £328 in September 2012, and is more than three times higher than the £200 that was being borrowed in March 2012.
Sixty-seven per cent of borrowing members surveyed run out of money by the third week after they are paid. Unite has dubbed this 'Wonga week'. However, not everyone turns to payday lenders, with the proportion of people using them remaining constant at approximately one in eight borrowers. Sixty-eight per cent of payday loanees need to return again the following month.
Unite general secretary Len McCluskey said: “This belated U-turn is welcome but will be cold comfort for those struggling to make ends meet who have been forced into a spiral of debt and fallen prey to the sharp practices of payday lenders. Questions still remain about what level interest rates will be capped at and when."
"Our research shows that as the grip of Cameron and Osborne's cost of living crisis has tightened, the average amount being borrowed to get through to the end of the month has soared to £660… Despite the government’s warm words people will be facing the dilemma of going cold this winter or paying eye watering interest rates to the likes of Wonga to heat and eat,” he finished, huffily.
Few would argue that the cost of living is not putting a squeeze on householders’ finances, but £660 seems high- those figures suggest those who are borrowing now need the equivalent of more than one week's average wage extra every month. However, Unite calculate that, had the national minimum wage kept pace with the rising costs of living, it would now be around £19 per hour, rather than £6.31 for those over 21.