Debt

"Breakthrough Britain: Debt"  | Published 10 July 2007

The number of people who admit to having debt problems, the many indicators which provide evidence on the scale of the problem and the contrast of UK indebtedness with that of Europe, all confirm the conclusion that 'personal debt is the most serious social problem facing the UK today'.

  
Click here for the "Breakthrough Britain: Serious Personal Debt" Report
Click here to read the Executive Summary

"Breakdown Britain: Indebtedness"| Published 14 December 2006

Click here for the "Breakdown Britain: Indebtedness" Report

Personal Debt

Consumer debt is at record levels with personal lending having reached 1,318 billion. Indebtedness is one of prime causes of stress and worry, with 74 per cent of British couples finding money the most difficult issue to discuss, and over a third reporting that they lose sleep as a result of financial concerns.

Debt cannot be viewed in isolation, it is both a cause and effect of other social problems, such as worklesseness. Low income families are some of the most vulnerable in society. We believe that the onerous burden that serious personal debt currently has on people in this country can be broken but that action must be taken now.

Our policies are designed to redress the balance between lenders and borrowers and to give every consumer the opportunity to learn how to manage their money effectively, and the space and freedom to do so.

It is not merely about getting people out of debt, but also providing people with the knowledge and skills they need to stay free of serious debt and the social problems so entwined with it, for the rest of their lives.

British consumers are on average twice as indebted as those in Continental Europe.

"Debt is one of the most significant challenges facing today's society. With the help of the policy recommendations outlined within Breakthrough Britain Report the voluntary sector is well placed to address many of the associated issues the indebted encounter."

Heather Keates, Community Money Advice

"I remember thinking,' How am I going to pay this? How am I going to pay that?' You just think how easy it would be to end it all. You wouldn't have all the worries. The only thing that stopped me was the fact that I had children to think about and a family. Soon afterwards I bumped into Byron, who mentioned he was working for his local church as a Christians Against Poverty (CAP) debt counsellor. He said that CAP helped people for free, and it didn't matter how much debt they're in... A week later, Bryon came back with a financial statement, a reasonable monthly budget and an affordable repayment plan... We've now got food in the cupboard, and I can concentrate on loving the children and my wife. Home has become a much happier place."

Clayton, a husband and father of two, severely in debt

Justine fled from Zaire to the UK with her two children when her husband was killed by Government supporters. She applied for asylum for all three of them and for almost a year she was housed in a transit camp before being re-housed in Glasgow. Her ability to save and repay loans was very restricted; nevertheless she has found a welcome and support in the credit union which helped her and her family to make friends and integrate with the local community. Justine believes that the credit union has been of immense importance to her and her children as they try to renew their lives and face the future.

9 policy recommendations

1. Greater competition for door-step lending

Increased competition and increasing transparency in the home credit market, would help reduce extortionate interest rates and help more people out of poverty.

2. Prohibit interest rate caps in the sub prime market

Caps would reduce the supply of home credit and in principle kill the credit industry, and the whole of the sub-prime market.

3. UK credit unions should be strengthened, supported and expanded.

Credit Unions are safe and need to be liberated from the excess regulation that is largely responsible for the diminutive size of the credit union network.

4. Banks should be held to a customers’ charter with law support.

A Bank Customers’ Charter should be drawn up, replacing the voluntary Banking Code, which monitors current accounts, card products, loans and overdrafts, savings and deposit accounts and payment services.

5. Support for Local Community based debt advice.

To ensure that smaller organisations are not marginalised by concentration of government funds on larger service providers.

6. The benefits system should be reviewed in detail.

If the benefits system were managed more efficiently it could be very valuable in tackling the problems of social exclusion.

7. Individual Voluntary Agreements should only be approved following independent advice.

Ensure debtors know the full extent of what it is they are considering and the alternatives.

8. Individual Voluntary Agreements should be made available to a further category of debtor.

We recommend that a new category of IVA should be made available for those with smaller consumer debts.

9. Personal finance education should be improved.

Education in personal finance needs to be made much more relevant and stimulating so as to better combat debt levels.