Autumn Statement: Reaction from CSA CEO

Commenting on the Chancellor’s 17 November Autumn Statement announcements, CSA Chief Executive Chris Leslie observed:

Jeremy Hunt’s package of announcements were sobering, contrasting sharply with the purported tax giveaways announced by his predecessor (and subsequently overturned). The implications for the collections and debt purchase sector are largely in respect of those customers who may now find themselves in deficit budgets and defaulting or at risk of defaulting on repayment commitments.

The economic outlook, on this occasion validated by the Office for Budget Responsibility, suggests we will endure two years of the most severe squeeze on disposable household incomes in modern history, falling significantly by seven percent by 2024. 

Anecdotally, although settlements and repayments are only beginning to be squeezed at this stage, the impact of inflation on real incomes coupled with rising energy costs from the coming winter suggests a more challenging environment for collections from next Spring onwards in particular.

That being said, the Government have intervened with a £900 targeted cost-of-living grant for those on means-tested benefits. Benefits and pensions are being uprated by CPI. Employment levels are still high. And wholesale energy prices have fallen back somewhat in the past month. So the Chancellor will be keeping his fingers crossed that the bleak economic projections made now become rosier as they approach a general election.

Certainly his strategy of pushing the hardest of fiscal tasks beyond 2023 and into the next Parliament shows both political pragmatism but also a desire not to impose severe austerity when the country is going through a recession. 

Markets may well query whether the tough decisions pencilled in for 2024 and 2025 are politically credible, but at the time of writing we haven’t seen the sort of adverse impact on sterling or gilt rates that greeted Kwasi Kwarteng’s announcements in September. The test now will be if inflation begins to turn a corner and mortgage interest rates clearly peak – because the impact on household finances of remortgaging are also very significant indeed if things remain as they stand.