Vulnerable, debt-laden households feel full effects of recession
Vulnerable, debt-laden households feel full effects of recession
Monday 8th February 2010
A study by the Institute for Public Policy Research (IPPR), involving 58 low-income families in London, Newcastle, Nottingham and Glasgow, reveals the full extent that the economic crisis has had on those deemed vulnerable to debt.
In the ten years up until 2008, average household debt in the UK increased from 93 per cent to 161 per cent of disposable income, according to the study.
It states that while many families were managing to cope with high levels of debt before the recession, rising unemployment, low pay and repossessions that followed meant that financial commitments were harder to maintain.
Over a quarter of the respondents experienced a fall in household income, including five people who lost a job and four self-employed people had their earnings reduced dramatically.
"Where the loss of earnings was significant, it resulted in a sudden inability to keep up with household costs," the study states.
"Faced with reduced income over a sustained period, any savings were quickly used up and debt and arrears spiralled."
Forward planning was also said to be "not realistic" for families on low incomes or in financial difficulty, and poverty and financial insecurity meant they were already vulnerable to debt.
Among a series of policy responses, IPPR recommends a savings account to build resilience, increasing access to fair and affordable credit, free financial advice, and flexibility on financial commitments.
Meanwhile, new statistics from the National Audit Office (NAO) reveals that consumers owed a total of £1,459 billion in November.
The report indicates rising levels of "over-indebtedness" among UK consumers, with the demand for debt help currently exceeding capacity.
News article brought to you by Debt1 - UK Debt Management Specialists
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