More Britons cut back on spending

Monday 23rd January 2012

With growing pessimism about the state of their household finances, a third of Britons plan to cut back on spending this year - a significant rise from in October.

More also say they are now saving and planning to pay down their debt, according to independent think-tank, the Resolution Foundation.

The poll is the third in a new quarterly tracker of household finances, carried out by Ipsos MORI.

Around a quarter (23%) of adults expect their household finances to get worse in the next year, with those on low to middle incomes the most pessimistic. This is a return to the levels of pessimism seen last summer.

One third of adults (32%) are now planning to cut back spending in the next year – a sharp rise compared to only 19% who said they would back in October. The poorest households and those in full-time work are even more likely to say they will cut back (both 38%).

Those making monthly savings have jumped from only one in five in October (22%) to 30% now, rising to half of those on higher incomes. Some 17% overall now plan to reduce their personal debt, compared to 12% back in October.

The research also finds that:
* 30% said they spent less at Christmas this year than last year;
* One in five (19%) cannot afford to go away on holiday this year.

Even in the context of this continued pessimism, some are still holding out for a pay rise: one quarter (25%) of those in work still say they expect to get a pay rise this year, rising to 32% of higher earners.

Gavin Kelly, Chief Executive of the Resolution Foundation said: "Families that are already hard pressed are preparing for yet another very tough year ahead, with a big rise in the numbers planning to cut back spending as well as trying to save and reduce their debts. Given this gloomy backdrop it’s a real worry that a new round of cuts to tax credits planned for April will further dampen the spending power of low to middle income families.

"The longer households cut back on spending, the longer it will be before we see real economic recovery."

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Mike Jones