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In March 2009, UK Health Secretary Alan Johnson announced Government plans to provide therapy and counsel citizens that are affected by the recession. Amongst the proposals was the recruitment of 4000 specialist counselors, as well as a new National Health Service, NHS, helpline for those suffering debt and recession.
Johnson was quoted as saying:
“In the current economic downturn, the potential exists for more people to become anxious or depressed. If someone is feeling down after losing his / her job, the best solution is new jobs, and we are helping people find them wherever possible. However, in some cases, depression and anxiety can be a barrier to getting another job.”
Yahya and Raeesa, both 28, worked in the financial sector. With the city collapse, both lost their 8-year-old jobs in a highly notable financial institution.
Both spoke to Islam Online:
“We are on the verge of losing all we have worked for,” said Raeesa.
“We were both very highly paid, and we thoroughly enjoyed the fruits of the short-lived boom years leading up to the recession.”
Yahya and Raeesa
Both Yahya and Raeesa invested in three UK properties, including a lavish barn house in the country. Other investments included properties in Jersey and Dubai.
“We have had to cut down drastically on expenditure,” added Raeesa.
“The gym and club memberships, the extra vehicles and a lot of luxury items have suddenly become expensive and surplus burdens on our lives”.
“Our whole being is now dictated by stress, and we are frequently arguing, often to the point of aggression and violence”.
Asked to advise others in their position, Yahya’s response was curt:
“Simple, save a little for a rainy day.”
Muna
Since leaving school in the early 90’s, aged 16, Gym worker Muna has been working all her life. She was made redundant in April 2009, and was at least comforted by the thought of her National Insurance contributions helping her ride out the storm.
“This was certainly not the case,” said Muna.
“I was shocked to learn that I was only entitled to £65 a week, as my spouse was earning a lower level wage. To say I’m devastated is the understatement of the year, and the 16 or so years that I have paid taxes and National Insurance, NI, contributions have led to absolutely no benefits for me.”
Salma
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“We are suffering from financial meltdown,” said Salma, a recently unemployed mortgage assistant.
Salma is not the only one. For countless women like her, the recession has contributed to the “worst period” of their lives, turning a poor financial position into a full scale catastrophe.
Escaping the Debt Trap
Martin Lewis’ Moneysavingexpert.com is dedicated to support people with financial worries.
Islam Online spoke to researcher Archna Luthra from Money Saving Expert, who offered readers a few recession busting tips to protect pockets:
“Pay off the debt. Being burdened with debt mid-recession is a nightmare. Any savings or spare cash should be directed towards paying your debts to help shift them; after all, the cost of interest is usually much higher than interest earned on savings.
“Beware of ‘income eaters’. If redundancy looms for you, avoid ‘income eaters’. This is where you sign up to payments which take a huge chunks out of your monthly earnings, and which obligates you to a set period. These include gym memberships; digital TV subscriptions; mobile phone cash back; any hire purchase e.g. TV; new car loan; and school fees. If you can’t avoid them, opt for shorter lock-ins.
“Do a debt audit. Even with the Credit Crunch, it’s still possible to grab the cheap rates now to cut the cost of existing borrowings. As redundancy means your credit score will plummet, it’s crucial to sort it out before it’s too late.
”The key weapon is credit card balance transfer deals, where you shift debt to a new card cheaply. If you can’t bag new credit now, call existing lenders and ask them if they’ll accept debt from your other, more expensive cards; remember, move it where it’s cheapest.
Trimming personal loan costs is tricky as rates are relatively high, and there are lots of penalties, but see if you can remortgage to a cheaper lender without a penalty.”
Archna suggests a benefits check-up for anyone worried about their finances. Benefits and tax-credit nets spread further and proposes a five-minute check at entitledto.co.uk.
Above all, Archna advises readers to “save on everything".
“It’s vital you don’t pay a penny more than necessary for goods or services. Take a day off to scrutinize everything you spend, and see if you can get the same for less.
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“Check if you can reclaim PPI or credit card charges; you’ll save £1000s, freeing up ‘buffer’ money if the recession hits hard. A step-by-step guide is available at Money Saving Expert.”
Financial whiz Mike Thomas is widely known as the Debt Wizard. www.debtwizard.com has clients in more than 80% of the nation's Police Forces as well as in the Prison, Fire and Rescue, Ambulance Services, the Ministry of Defense, and in other public service departments. Mike has regularly featured on TalkSPORT and BBC radio, as well as BBC television news, ITV, Channel 5 and SKY on debt related issues. Many not only regard him as the authority on police debt but also UK's leading expert.
Headed by Mike, Debtwizard® is one of the UK's leading debt counselling organisations, offering practical solutions and impartial advice on reducing debt.
He told Islam Online:
"The recession has helped to change the behavior of a lot of UK residents from being spenders to savers. Over the last decade an enormous amount of debt has been generated by individuals who have bought homes and purchased everything from cars to kitchens and generally enjoyed good life.
"However, now that the economy has turned sour we are seeing a rapid increase in people having to declare themselves bankrupt and losing their homes. These difficult times have made people worried about their financial future, and as a result people are saving more of their incomes in order to rapidly repay their debts.
"Luckily, it appears that the UK is set to quickly come out of the recession, and then enjoy rapid growth. So we should now see a slowdown in the number of people facing real problems and next year a real improvement."
"However, those people who are losing their jobs must move quickly to let their debtors know their situation. It's the people who stick their head in the sand and don't tell their debtors that their circumstances have changed. They then end up in real financial trouble."
Risky Business
In light of the current world economic crisis, the new local Government Network has recently published a report on the abysmal state of Britain’s financial affairs.
In the report published 25th May 2009, investigators have pointed at 200,000 people in Britain, who were at risk from illegal loan sharks because they could not access credit from traditional lenders.
Chris Leslie, the author of the report said:
“There is evidence to suggest that the pernicious trend of illegal unsecured lending at extremely high rates of interest, or ‘loan sharking’, is making a comeback. The diminished availability of regulated sub-prime credit is creating conditions where a sizable number of people have little option but to borrow from illegal sources. At least 165,000 people already use loan sharks in the UK and we can expect the number to rise sharply.
“Local government has historically been at the forefront of new service provision where community needs exist and have the advantage of proximity to their front line and prime local knowledge. Further intervention from local government is a crucial next step, and we look forward to strong leadership from the private sector at a time of great urgency.”
A combination of the reduction in sub-prime lending, often known as “door-step lending”, and the economic downturn may lead to more people having to use illegal money lenders according to the independent think tank of the New Local Government Network, NLGN.
Furthermore, the report predicts that more 35,000 people are likely to have to use loan sharks during the recession but admits that the figure could be even higher. The think tank is urging local authorities to put additional resources into local credit unions and even to use new Council Banks to offer affordable credit to people who can’t access high-street loans.
NLGN predicts that an additional 250,000 people could lose access to doorstep lending. With increase in refusals by the government to provide loans, old customers of these services may turn to loan sharks.
It argues that local authorities need to step in to protect the vulnerable people in their local community by offering a range of support including more Credit Unions, mapping predatory lending and enhancing enforcement against loan sharks.
Loan sharks are unlicensed money lenders, who operate illegally and are not regulated by the financial industry. They are prepared to lend to the financially vulnerable, but charge astronomical interest and the borrower is not protected by any form of contract or terms and conditions. Some credit unions have reported loan sharks charging interest of up to 2,500,000%.
The UK has officially been in recession since 23 January 2009. Technically this means the economy has shrunk for two successive quarters yet this barely considers the real impact of job losses, pay cuts and scores of companies going bust.
Though deflation has also eased the cost of living, for many, the only silver lining was that interest rates were cut down, meaning cheaper mortgage rates.
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