Figures from the Bank of England have indicated that many people in the UK are still struggling with huge debt levels, with a lot of the debt having been accrued some time ago. The central bank has suggested that consumers had started to tighten their belts even before the VAT increase came into play at the start of this year. However, many still face huge levels of debt this year according to the report.

Many consumers are still paying off debt that was accrued last Christmas according to the data in the report. Figures have shown that over recent months consumers have been paying back debt rather than accruing it, and the VAT increase has resulted in more people tightening their belts so that they do not fall into further financial difficulties.

However, there are many factors that are out of the control of consumers, such as inflation levels, the VAT increase, job losses, and spending cuts, all of which could have a severe negative impact on the state of household finances. This means that even with the best of intentions many people could be set to face another difficult year with high debt levels to deal with.

Whilst personal insolvencies are said to have fallen officials are concerned that the level of insolvencies is still high. Many are calling for increased assistance for consumers to learn how to manage their money better.

One official from the insolvency service said: “Although personal insolvency levels are no longer rising, they remain stubbornly high, reflecting the high levels of personal debt that persist across the country. Prevention is much better than cure as far as personal finances are concerned. Review your personal finances frequently and make sure you are not taking on debt you can’t afford to repay.”