Problem debt: not just damaging for adults, but children too

A new report by the Children's Society highlights the damage being done to children by debt.

A new report by the Children’s Society highlights the damage being done to children by debt, writes Carl Packman

The impact of debt on individuals and households already extends far and wide. The financial impact on an individual may for instance result in their being credit impaired, which has a profoundly negative impact if they should wish to take out a mortgage loan for example, or take out a personal loan.

The economic impact means that the indebted will spend less on their high streets which in turn stops local businesses generating income. Furthermore, people are not able to save as much money which means they are less prepared to withstand financial shocks such as a broken down car or household item.

Further still is the societal impact. A wealth of research has been carried out over the years to show the impact that debt has on an individual’s mental health. Recently the think tank Demos carried out research positing that a typical analysis of debt in the UK neglects hidden debt such as rental arrears meaning the figures are skewed.

Today a report jointly authored by the Children’s Society and the debt charity StepChange has found a series of other impacts that debt has, namely on children.

It supposes that children in families with problem debt are more likely to be bullied and unhappy, are more likely to worry about their family’s finances which has a negative effect on their childhood in general, and are more likely to have their education interrupted by arguments.

As the recession started to have an impact families had to cut back. It is no surprise that in recent times the volume of people referred to good banks by the DWP has shot up. The report out today shows that nine out of 10 families in problem debt have had to cut back on essentials such as food and clothing in order to keep up repayments.

Loan companies themselves will no doubt see the report today and say they cannot be blamed for putting families in troubling debt. This is certainly debatable, particularly where companies have aggressive tactics for repeat customers among those on low incomes. But one thing they can blamed for is their aggressive marketing strategies.

Lord Parry Mitchell recently raised the spectre of aggressive advertising undertaken by payday lenders in the House of Lords after it emerged that lenders were spending up to £500,000 on advertising during children’s TV alone. Lord Mitchell had heard stories himself of families struggling with their children attempting to help by saying ‘it’s ok, you can go to Wonga’.

I myself have heard similar. I spoke to a teacher last year who told me that during a lesson on financial education most children had not heard of mortgages or fiat money or deficits but had heard of loan sharking and Wonga.

The report out today should be slapped down on the prime minister’s table immediately. He might have ignored it when it was an issue confined to the poor but problem debt is now affecting children.

Now only does this report comment on debt, but it speaks to what it means to be a child. Children deserve to be children. They deserve to have childhoods that are free of the trappings of modern adult lives. They don’t deserve to be bullied on the grounds that they don’t have what others have, and they certainly don’t deserve to be part of a legal loan shark’s advertising strategy.

When Parliament recently grilled the Financial Conduct Authority about payday lending, the regulator responded by saying that the issue was out of their hands and those concerned should take it up with the European Human Rights Court, article 10 on freedom of expression. This clearly is not good enough. With any luck this report will act as a catalyst for policymakers to wake up to issue of debt and children.

6 Responses to “Problem debt: not just damaging for adults, but children too”

  1. Mike Stallard

    “When Parliament recently grilled the Financial Conduct Authority about payday lending, the regulator responded by saying that the issue was out of their hands and those concerned should take it up with the European Human Rights Court, article 10 on freedom of expression.”
    Debt is a terrible thing because it enslaves the debtor to the creditor. Of course, the poor get shafted – as ever – with several hundred per cent APR. This is disgusting. Loan sharks. Of course, as with heroin, as with crime, as with many divorces, it is the children who suffer.
    And the worst offender? Yup, you guessed it – the government. Now their debt stands at getting on for £1,500 billion pounds. the entire government expenditure and take up for a year comes to well under £800 billion. So what an awful example that sets.
    And let us get it crystal clear: the Conservatives, the LibDems and the Labour Party are all very much to blame for it too.

  2. LB

    Amazing isn’t it. A whole article on debts, and the biggy isn’t mentioned. The average tax payer has a 300,000 state debt burden.

    Then there is the issue of debt. If you are born in the UK, you are born into debt bondage. You have to pay that state debt. Time for the same for the first world as for the third. That debt needs to be cancelled. Even with its dire consequences for those that are owed the money.

  3. LB

    Now their debt stands at getting on for £1,500 billion pounds

    ==============

    Right idea, wrong number. It’s 9,000 bn. The 1,500 is just the borrowing.

    There’s the state pension, zero assets

    Civil service pension – zero assets

    PFI

    Nuclear cleanup

    Expected losses on guarantees

    ….

    http://www.if.org.uk/archives/2031/ons-reveals-full-uk-pension-liabilities is out of date but shows some of the extra debts hidden from the public.

  4. Mike Stallard

    You cannot just cancel a debt by fiat.
    If you do, then you lose credibility.
    You do not lend money to people who are not reliable and you do not make contracts which can be cancelled without warning.

    At the moment, interest rates are kept really low so people aren’t punished for living above their means. It might be an idea to push interest rates up slightly…

  5. LB

    Of course you can. People cancel debts all the time by going bankrupt or into an IVA.

    The same applies to countries.

    Then you have the expedient of just changing the terms.

    The problem is about forced lending. e.g. Look at the state pension. People are forced to save via the state and NI. They are owed pensions in return. So can the state pay? No. The debt is too large and its an unfunded scheme – no assets.

    Canceling the debt by fiat? It’s already started. Raising the retirement age is a partial cancellation. Ditto CPI not RPI.

    So push up interest rates, and the state is pushed into default faster.

  6. LB

    Then the mad socialists want to get the poor into more debt so they can carry on spending on the special ones, themselves.

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