By Kiri Adams, Social Policy Manager at Christians Against Poverty
You will often find debt and poverty come hand in hand. Low income, poor living standards, ill health, relationship breakdown and unemployment are all interconnected. Yet, until recently, very little research had been undertaken to explore the link between debt, poverty and living standards. Earlier this year Christians Against Poverty (CAP) released some new research on this topic, in partnership with the Centre for Research in Social Policy (CRSP), entitled ‘Pushed under, pushed out’.
CAP is a national charity, providing free holistic support for people facing problem debt with face-to-face services, tackling both financial difficulty and the wider emotional impact. CAP’s flagship work is its debt help service, offering debt counselling and ongoing support to help our clients reach debt freedom. With one of CAP’s mission statements being ‘see an end to UK poverty’ this latest research seeks to help inform and drive changes to tackle debt, poverty and poor living standards across the UK.
The research
The data used in the Pushed under, pushed out report came from the Office of National Statistics’ Wealth and Assets survey, which is run every few years. The data allows analysts to track individuals’ financial lives over a period of time, which means that we could see how debt – including debt type, debt repayment levels and life events – all play a part in increasing or decreasing someone’s risk of falling below the Minimum Income Standard (MIS). MIS is a measure of living standards developed by CRSP and the Joseph Rowntree Foundation (JRF).
The findings
1. Some demographics were most at risk
Certain groups, such as lone parents, people living with disabilities, and people who are unemployed, all faced higher risks of falling below MIS when considering debt and debt repayments. This research provided further evidence to confirm that these groups are often hit hardest by poverty. But it also showed how debt makes their situations even tougher, pushing them further below what’s needed for a decent standard of living.
Standard poverty measures often fail to take debt or assets into account. Yet low income families who are in debt are expected to pay most of their disposable income to service these debts, which can greatly impact living standards. So, this research compared people’s living standards before and after debt repayments had been taken into account.
The findings revealed that having to pay even a small amount towards debt repayments can put certain groups at a very high risk of falling below MIS. After tracking people’s life events, we also found that those who experience a relationship breakdown, or job loss, were at high risk of falling below MIS.
2. Some types of debt put people more at risk
It was interesting to find that not all types of debt put people at equal risk of falling below MIS. Understandably, those who had fallen behind with their household bills were at a higher risk compared to those who didn’t have that type of debt. Interestingly, however, people were found to be more at risk of falling below MIS if they did not have a credit card (38%), compared to those who did have a credit card (21%). Further research is needed to explore this, but one factor may be that people who have higher incomes are able to access this form of mainstream credit, whereas low income households may not be able to access this type of credit.
3. People who are below MIS for a long time are more likely to have debt
The research also allowed us to look at what happens to households who are below MIS for a long time, people who are living consistently below an acceptable standard of living. We found that if a household had been living below MIS for four consecutive waves (over eight years), the likelihood of reporting that their debt was a burden jumped from 40% (in wave 1) up to 65% (by wave 4).
This confirmed what we already know: that long-term poverty can have a weathering effect, eroding people’s financial resilience.
Ben’s story: The lived reality of financial difficulty
Ben started living independently at age 16. However, by 18, he was no longer eligible for support and was housed in an unfurnished council property with no job, no income and no support network to help get him on his feet. Living on only £103 a month at the time, he struggled to furnish his property, resorting to things like washing his clothes in a bathtub. At that time he was also suffering with epilepsy, having as many as four seizures a week, which made finding a job hard. As Ben tried to access the right Government support, he managed to get a job as a pot wash and ended up having to work many hours because he was on such a low wage.
Ben’s story is one of many of someone trying to survive on a low income, far below the Minimum Income Standard, and accruing debt along the way.
What can we learn?
There are many insights and policy recommendations that can be taken from this research, to help us create a future where no one lives in poverty in the UK.
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This article is featured in our 22 May newsletter.
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