A new survey by consumer site uSwitch has revealed that almost one fifth of people have debt problems as a result of trying to meet everyday costs.

uSwitch carried out the survey in order to gauge people’s feelings about their finances in the run up to the Emergency Budget, which will take place next week. The study showed that 18% are turning to debt in order to fund their everyday costs, whilst a further 14% are struggling to keep up with repayments.

The cost of debt has been rising since the start of the economic decline and overdraft and credit card rates have shot up, leaving people paying out more each month. Although the base Bank rate has remained at 0.5% for more than a year, the cost of debts has continued to rise.

The study showed that confidence in the economy is exceedingly low, with more than half of people feeling that they are financially worse off than ever before.

One fifth of people surveyed were still worried by job security and do not think their job is secure, while almost half were expecting a pay freeze on their wages.

The main worry regarding next week’s budget is that a VAT increase will be approved; with 60% of people surveyed saying this was their main concern.

The study also looked at the financial concerns of people over the next six months. 13% of people, which is equivalent to 6million people in the UK, said that they will struggle to pay their monthly bills on time. A further 8%, equivalent to 4 million, say that they may be forced to default of credit repayments such as loan or credit card costs.

In preparation for next week’s budget, 54% said that they have already cut back on their spending, with 9% making big purchases before the 22nd June in case of a VAT increase.

The Director of Consumer Policy at uSwitch, Ann Robinson, said: "Consumers are working hard to stay afloat but are in for a tough time. Short-term debt solutions may be an easy way to fund the cost of living but they can lead to severe debt issues if not managed properly. Rather than continuing to plug the hole by borrowing, consumers need to work harder to strip down their essential bills to the bare minimum. This is crunch time for UK households."