Personal debt is set to boom in 2015 – communities must change tack

We are caught in a debt-trap and we all need to talk about it

Man-worried-by-debt

 

Debt has been very high on the news agenda recently. Greece for example: a country plagued by debt, which decided in early days that rather than taking the default route would take on new loans from German, French and other creditors in return for harsh and predictably ineffective austerity measures, and which has this week elected a government who will fight tooth and nail to renegotiate their debt repayments.

So what tremendous timing it is to see Mark Carney, the governor of the Bank of England, attack the spectre of austerity by saying the single-currency area was caught in a ‘debt trap’.

“Low growth deepens the burden of debt”, he told a Dublin audience on Wednesday.

“Workers become discouraged and leave the labour force. Prospects decline and the noose tightens.”

Of course we don’t only have to look out to the wider Eurozone to find the burden of debt. This week is Debt Awareness Week, launched to raise awareness of post-Christmas finances among UK households and to help them ‘take back control’.

However, nothing looks more out of control at the moment than personal debt. In a frightening but entirely necessary move, StepChange has put up a live feed which shows the total amount of debt it has dealt with as an advice charity that week on its website. When it was last updated at the time of writing at 5pm on 28 January, the total amount dealt with was a huge £136,786,623.

2015 was predicted to be the year of a further personal debt explosion. A This Is Money study found, for example, that there are now twice as many who believe their finances are set to worsen in 2015 than did in 2014.

Despite some early wins such as the imposed cap on the cost of a payday loan by the regulator the Financial Conduct Authority, and their current investigation into the credit cards industry, a lot more will be needed to try and reverse the nation’s addiction to credit.

Surprisingly, there has been a fall in consumer credit use from 2008, using Bank of England data, but this is from a dramatic high of £208bn collectively owed. Currently, for unsecured credit, we owe £168bn, which equates to a terrifying £5,800 per UK household.

A report published last week by CUNA Mutual, the insurer, found that a third of consumer borrowing was carried out to cover existing debts. While the coalition government may wish to celebrate the return of Britain the financial powerhouse, one cannot help feel that the recovery is unevenly tipped when you see the Britons piling debts onto debts just to get by.

And just this week research by Prudential, a financial services company, found that one in five people retiring in 2015 will do so with debts averaging at about £21,800. While the majority of retirees expect to pay off their debts within three years- you can understand their needing to be optimistic – 9 per cent believe it will take them nine years or more to pay back, and five per cent don’t believe they’ll ever pay them off at all.

Though it makes for shocking reading, it is most praiseworthy to have these organisations and others such as StepChange and Citizens Advice, bring to life what debt actually means for people. Left with government produced data we only get a partial sight of numbers high and low to work with, but charities, advice agencies and financial services research departments make it real.

A project I’ve been working on, with colleagues at the Political Economy Research Centre (PERC) in Goldsmiths University, has just published the first of many public reports, looking at how campaigners, charities, and community groups have responded to this personal debt crisis.

One of the things that became apparent early on was the extent to which civil society groups and communities are tackling debt in their own way. Where previously personal debt was a subject of much stigma and shame, now money talks and collective debt advice sessions take place in church halls and online in debtor forums.

To sit alongside the debt advice sector’s data, personal testimony of debtors both online and off are telling a far more detailed story about what it means to be in problem debt today.

Local communities, financial innovators, and policymakers must still be urged to seek alternative forms of responsible credit, which rather than fuel debt dependency seek to temper it, and regulators need to continue their work ensuring markets work for consumers as opposed to exploiting them.

But while they do this we should not ignore the efforts of communities and debtors to find solutions to today’s personal debt problem themselves. Speaking out about debt – especially but not exclusively during Debt Awareness Week-  can begin to stave off some of its excesses.

Carl Packman is a contributing editor to Left Foot Forward and the author of Loansharks: The rise and rise of payday lending

29 Responses to “Personal debt is set to boom in 2015 – communities must change tack”

  1. LB

    So how much money does the state owe for pensions?

    Ah yes, 7,300 bn with no assets.

    But since its a socialist welfare state that’s created it, you’ll keep very quite about that disaster.

  2. Leon Wolfeson

    Ah yes, the disaster of being allowed pensions, as you claim there are no workers. As ever.

  3. Leon Wolfeson

    People will borrow for rent and food, until they can’t any more and they wind up on the streets. This is, yes, a complete disaster.

    Both Labour and the Tories are committed to slashing the social security net further from the current state which is already causing this. You’re whistling in the wind, because people need food and shelter – you need to be focusing on basic welfare and economic policy.

  4. Godfrey Paul

    What a load of nonsense.

    No one has to take on debt. It is a choice individuals make and must live with. It comes down to people making responsible decisions about their finances.

  5. LB

    Yes you do. You have to take on the debt that the state has run up.

    Where’s the opt out that says I don’t want to pay for past state errors?

  6. LB

    Of course they will Leon, they aren’t stupid.

    But for you, the state is good and you won’t look at the simple fact is the state fucking people over.

    ie. Where’s the pension contributions?

    How much does the state owe?

  7. LB

    How much does the state owe for pensions?

  8. wj

    How many councils will raise their council taxes to build up bureaucracies that are a burden on the indebted.

    In my city the Labour council are proposing a just-short-of 2% rise whilst they indulge in various ‘award’ evenings and cultural celebrations – the pigs are on their hind legs and swilling champagne whilst the ‘indebted’ are outside looking in.

  9. MalcolmH

    Nonsense. What consumers need is the ability to borrow and make effective use of lifetime earnings.

  10. Leon Wolfeson

    Look at the entirely public figures, LB.

  11. Leon Wolfeson

    No, unlike you I’m not into using the state to fuck people, I’m not actually a genocidal look like you.

    No surprise you demand there be no workers.

  12. Guest

    Of course you don’t want to pay tax, ever, that terrible “error” as you try and bill others instead, for everything.

  13. Leon Wolfeson

    Yes, they can starve in the streets. Nobody has to pay for food or shelter, after all.
    *claps*

    The good capitalist planner, it’s Godfrey Paul!

  14. Guest

    Ah yes, how dare they have customer service. Why, Tory councils are taking on your advice and not doing much of anything except stop benefits wrongly. Helping out your poor, indebted 1%.

    No surprise you’re against below-inflation rises as you criticise spending less than your breakfast, as you try and focus people on elected officials rather than your unelected rich.

    Also, since when did Labour run in Bermuda?

  15. LB

    9 Trillion increasing at 734 bn a year. That increase exceeds total spending. ie. Comes on top. It exceeds taxation at 600 bn.

    That’s the total figure.

    That means the state has fucked the poor.

  16. LB

    You are. You’re in favour of taking their money and spending it. Leaving them destitute in their old age.

    Why else would you deny pension’s debts?

    How much does the state owe for pensions?

  17. sarntcrip

    what an unrealistic smug commenti have no debt at all,then i’m single with no kids and no pets
    I would not be so presumptious as to judge others based on zero knowledge of their circumstances it is not inconceiveablethat some people have to rob peter to pay paul with some debt to ensure the kids are fed and the heat is on
    not everyone is as fortunate as i guess Godders is!

  18. wj

    I see you are spouting your usual nonsense that doesn’t address the point I make – How can our councils complain about austerity when they are taking money away from front line services and wasting it on six-figure salaries and wasteful projects.

    Tell you what Guest – you tell me what you do for a living and I’ll tell you what I do.

    I’m a carpenter, always have been and am happy with my insignificant and humdrum life – what do you do Oh, Great Working Class Champion.

    As far as I know I have never been to Bermuda.

  19. madasafish

    Don’t bother replying to him.
    He posts as if he knows it all when he knows nothing, lies and is often deeply unpleasant.

    A person to treat with the contempt he richly deserves.

  20. Guest

    “UR”, your only response, as you accuse me of your denial of pension debts, as you refuse to read the public figures, demanding instead that pensions not be paid so you can take people’s money and profit.

    It’s you, Lord Blagger.

  21. Guest

    So, you admit you’re a coward who holds me in respect, I see.

    Thanks for projecting yourself onto me, as ever, as you call facts unpleasent.

  22. Guest

    Smashing people’s businesses, Bermuda man, with a legal hammer is not “carpentry”.

    Your arguments that council people should work for free rather than the small fraction of CEO pay they get continues, as you criticise serving the 99% as waste.

    You’re transparent.

  23. Guest

    No, your calls to fuck people continue, as you continue your Jihad against workers and pensions, as ever, and fail to understand basic economics.

    Oh, and you haven’t read the public figures, of course.

    Easier to scream that workers like me are the enemy, sitting pretty as you are in Monaco.

  24. LB

    I haven’t found the ‘public’ figures. Only estimates based on the assumption they don’t have to pay the pensions. ‘Contingent’. Doesn’t say what on, and the ONS, OBR, DWP, Treasury all can’t tell what the contingent events are.

    So humor me and tell me where the public figures are. A link please.

  25. Guest

    I’m not a google search bot, and for someone the third (genocidal) sort of funny…no.

    You estimate a lot, based not on government figures but your bigotry, as you can’t even read the footnotes.

  26. LB

    I base my figures on the only estimate that I’ve found. It’s the ONS.

    So you claim the pensions debt number is easy to find. but you can’t deliver on a link.

    Come on Leon. Confess or deliver the goods.

  27. Guest

    Ah yes, “confess”, you say, as you act like the inquisitor you long to be.

    You are incompetent and unable to find a basic figure. If you want me to work for you, then you can pay. Or you’ll torture me, right, showing your hatred for basic rights, etc.

  28. LB

    7,300 bn rising at 636 bn a year.

    So either agree the figure, or provide an alternative.

    http://www.ons.gov.uk/ons/dcp171766_263808.pdf

    That’s the unofficial figure. The debts are not on the books.

  29. LB

    9 trillion debt.

    Your share of the debt is 300,000 pounds.

    How are you going to pay your share?

    How’s a min wage earner going to pay his share?

    If they can’t then you have fucked the poor.

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