Mind your language
By Phil Andrew, Chief Executive, StepChange Debt Charity
How we talk about debt matters greatly in a world that makes assumptions about its causes.
Talking about debt — its causes and consequences — remains a deeply unsubtle art in this country. Essentially, the world divides into two polar opposite shorthand narratives: Sinners and saints.
Back in August, the Office for National Statistics published a report on the state of the nation’s household finances. It drilled down into the data showing how in 2017, for the first time in thirty years, the average UK household was a net borrower rather than a net saver.
Unsurprisingly, households lower down the income scale had a bigger gap between their borrowings and their savings — while at the other end of the spectrum the richest households are still comfortably net savers.
The report was important and timely, but something else struck me — and that was the language used. It talked about households “living beyond their means”. Our media reaction pointed out how this language implied that households had a choice, and had made a feckless one, but that this was not necessarily an accurate representation of people’s experience — a point that hit home.
At StepChange, we know that for all too many households debt only occurs because there’s simply no choice but to borrow to make ends meet.
Yet there’s a common narrative that sees personal debt as an unfortunate consequence of people making poor financial decisions and living a “jam today” existence that comes back to bite them.
The opposite view sees problem debt as all the fault of the big, bad, avaricious lenders and unbridled free markets that ride roughshod over consumer protection.
Of course neither of these narratives entirely represents the complex reality. Yet, all too often, we see the reporting of debt shoehorned into one or other of these convenient shorthands.
In reality, the people who seek help from us for their problem debt can’t be distilled into a single group, whose problems arise from a single cause.
We know that changes in circumstances — job loss, divorce or ill health — that create a disruption to income are a major driver of debt. We also know that a small proportion of people do overspend or don’t budget for their spending relative to their income, and don’t know how to deal with the damage once it’s done.
Problem debt in these cases might have been avoided by cutting back, budgeting and taking decisive action about their finances at an earlier stage.
However, the most shocking thing we see is that our clients are getting younger, and poorer, and have fewer positive indicators in the way of assets (such as home-ownership) than the clients we saw a decade ago.
It’s an inescapable fact that, in Britain in 2018, too many lower-income households simply don’t have enough money to pay their day-to-day bills, providing the fertile ground in which problem debt grows. This represents a significant shift in in recent years.
Many poorer households are facing an inexorable slide into problem debt even as they are trying to cope, perhaps being forced to borrow to pay for essentials and then finding themselves in a spiral of being unable to pay back.
Many others find that the government gives with one hand and takes away with the other, as benefits are docked to pay back arrears on debts such as council tax, social housing rent arrears, magistrates fines or previous benefit over-payments, pushing them further into debt.
It’s impossible to escape the fact that debts to the state and to utility providers are now just as much a part of the problem debt landscape as debts to commercial providers of credit.
Only by acknowledging this shift — and the real reasons people fall in to problem debt — can we begin to identify the solutions needed.
And perhaps once we’ve done that, we’ll start to see a public debate more fitting of the reality of people’s lives and daily struggles.
This is an abridged version of an article that first appeared in Credit Strategy magazine in September 2018.
