Falling inflation is good new for households struggling to meet their bills - but the worry for many is it’s too little, too late to make much of a difference.
The Bank of England announced inflation fell to 3.6% in January - the lowest since February 2010.
Governor Mervyn King explained in a letter to the Chancellor George Osborne that the rate is expected to keep falling and will reach the target rate of 2% - 2.5% around the end of the year.
He blamed last year’s increase in VAT from 17.5% to 20% was the main driver of high inflation, and that this has now worked through the economy.
King also warns that uncertainty in eurozone economies may still undermine tough policies to deal with national debt in the UK.
However, many experts claim lower inflation is matched with low wage rises and fewer jobs.
TUC General Secretary Brendan Barber warned workers are still getting poorer despite falling inflation.
“Inflation looks like being somewhat less of a problem in 2012, but our persistent lack of economic growth, mass unemployment and the ongoing damage caused by the government's austerity programme remain huge dangers,” he said.
Pensions and annuity firm MGM Advantage reckons each household still needs to find an extra £1,259 this year just to keep living standards at the same level as a year ago.
For households struggling with debt and mounting financial problems, lower inflation means prices that are already too expensive are simply rising at a slower rate than they were at the end of last year.
Households already failing to pay their bills need to keep a firm grip on their budgets - and if they are falling short with meeting their commitments each month, should consider a strategy to deal with their debt.
This can range from an informal financial management plan that involves renegotiating monthly credit card and personal loan payments with lenders to more formal IVA (individual voluntary arrangements) or bankruptcy.
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Notes to editors:
- Money Debt and Credit is one of the UK's fastest growing financial solution companies.
- The company was founded in 2006 on the belief that every client has the right to appropriate financial advice. Since then we've gone from strength to strength and have helped thousands of people with a variety of financial solutions.
- We offer a range of services including Financial Management Plans, IVA s, Loans, Mortgages, Full & Final Settlements, Bankruptcy, Investments and Pensions.
- Specialties: IVA s, Financial Management Plans, Loans, Mortgages, Trust Deeds, Full and Final Settlements, Bankruptcy
For more information or debt advice contact:
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