‘Improving lives’ must include tackling problem debt
By Laura Rodrigues, Senior Public Policy Advocate
Today, the government have released the first in a series of papers on ‘improving lives’ focused on helping workless families and improving the outcomes of their children.
Importantly, this recognises that problem debt is a key issue for these households and is strongly linked to the other issues highlighted like parental conflict and homelessness. However, the paper does not stress the need to tackle the causes of problem debt itself.
Working families also vulnerable to problem debt
The paper specifically links problem debt with worklessness when debt is not just an issue for those who are unemployed. Working families can also fall into financial difficulties particularly if they are on low wages and in insecure, temporary work.
The paper cites research showing 14% of all workless households were in problem debt, compared to 6% of households where both adults were working. However, it does not mention that this research also found that 9% of ‘mixed’ households, containing both working and workless members, were in problem debt. Therefore 15% of households with at least one person working are in problem debt whereas 14% of workless households are in problem debt.
This confirms what we already know that problem debt is not solely a worklessness problem. Last year, over half of the people that came to us for debt advice were working (31% employed full-time and 19% employed part-time) compared with under a third who weren’t working (30% unemployed).
The paper rightly identifies that problem debt can occur due to persistent low income and ‘shocks’ to income. However, both these situations can occur when households are working.
Persistent low income can mean long-term unemployment but it can also mean working on a low wage over many years. Shocks to income can involve losing your job but it can also include cut backs to working hours, being on temporary or zero hour contracts or getting ill and having to take long-term sick leave.
Income shocks are driven by aspects of our flexible labour market, people in insecure work are twice as likely to experience an income shock. The quality of employment and adequate safety nets to protect those who lack secure and sufficient incomes are also important.
The government announces new initiatives to tackle the issues identified in the paper including funding relationship support for unemployed families and the next phase of the Troubled Families programme focusing on worklessness. We support evidence-based initiatives to support workless households particularly to improve outcomes for children. However, problem debt is not just a worklessness problem and we need a broader and more detailed response on this from the government.
‘Breathing space’ can protect families
Tackling problem debt can also help alleviate family relationship stresses and it is important to give those in temporary financial difficulties help to recover. We need a ‘breathing space’ protection scheme to protect families in problem debt from spiralling interest and charges and enforcement action. We also need to build financial resilience through greater support to help low-come families save and more access to affordable credit as an alternative to high cost lenders.
Problem debt can have a devastating impact on children leading to anxiety, bullying at school and having to go without essentials. To really improve the lives of children in low income families the government needs to take strong and decisive action to tackle problem debt.