29.06.2005
Personal debt can prevent people rebuilding their lives, university survey finds
Personal debt can be directly linked to unemployment and can in fact prevent people from finding work, a seminar heard yesterday.
A study by the University of Brighton has found that the spiral of debt not only affects a borrower's health, relationships and social life, it can also seriously impede an unemployed individual's ability to rebuild their life by finding work.
The special report is the brainchild of the employment charity Tomorrow's People, which has a 20-year track record of helping people out of long-term unemployment, debt and welfare dependence. The charity's employment advisers had reported that 30% of those that they had helped had given debt as a reason for not entering employment and that there appeared to be little research on this issue.
The findings of the study which was carried out by Professor Peter Ambrose and Liz Cunningham of the Health and Social Policy Research centre at the University of Brighton, were launched today at a special half day conference on debt, poverty and unemployment, held at University Centre Hastings, East Sussex.
Hosted by Tomorrow's People, the key note speaker at the conference was Lord Eddie George, Governor of the Bank of England from 1993-2003. Other panellists included the report's author Professor Ambrose, the Rev Paul Nicolson, Chair of the poverty campaigning group the Zacchaeus 2000 Trust and Georgiana de Lussy, Vice President of Hastings and St Leonards Credit Union.
The study, entitled "The Ever Increasing Circle", which was funded by the Government Office for the South East, Hastings Borough Council and the Greater Hollington Neighbourhood Management Partnership, began in the summer of 2004 when the authors carried out a survey of unemployed clients with debt problems from the Citizens' Advice Bureaux in Brighton, Hove and Hastings, and the Greater Hollington Neighbourhood Management Partnership in St Leonards-on-Sea.
The report's key findings are:
- Debt as a barrier to employment was mentioned by 38% of those who responded to the survey
- The most common reasons given for not entering employment were personal circumstances, like debt, rather than the local labour markets
- The average level of consumer debt per household interviewed was £11,000 in Brighton and £8,000 in Hastings
- The most frequent forms of debt were credit cards, bank overdrafts and loans and store cards and catalogues
- In most cases the debt had been started by a wide range of 'triggering' episodes, almost all of an unforeseen nature, like illness, and/or redundancy
- Very often those in debt did not seek help at an early enough stage as they were not aware of the help available or of the possibility of borrowing at a lower cost from a credit union
- Lenders of almost all kinds continued to press further credit even when the debtor had obvious repayment difficulties
- Being in debt produced a wide range of consequences for those interviewed including some serious adverse effects on health, family relationships and social life
The report's findings offer important intelligence for businesses, financial institutions and support agencies into what the community as a whole can do to enable debt-burdened individuals to rebuild their lives and become economically active again.
As one of the clients interviewed in the study about finding a job when in debt said: "It's a no win situation. And if you go back to full-time work, again you fall into a less-helped category and take on more responsibility, and it's this big support thing of going back to work, sorting things out, changing your routine, contacting your debtors, paying and maintaining your bills, incurring costs to do with work, travel, etc."
The study also makes a number of recommendations going forward. These include:
- Making more funding resources available for the Citizens' Advice Bureaux, Tomorrow's People and other money advice and advocacy agencies to both deal with the urgent current need and to take some preventative educational steps including working in schools to educate children on a range of money issues and providing more adult learning courses about money and debt
- Urgent consideration should be given by Government to measures that will reduce irresponsible lending and promote credit unions
- More intensive support work with existing clients should be available at the point where their circumstances change so as to allow them to enter employment more easily
- Much more research is needed to identify more precisely the adverse health and other effects of debt and the costs these effects generate for the NHS and other public budgets
Debbie Scott, Chief Executive of Tomorrow's People, said: "Tomorrow's People has been running debt advice services for a number of years and decided that more research was needed into what appeared to be the clear link between debt and unemployment.
This study has not only verified that debt is a considerable barrier to people finding work, it has also delivered many other interesting findings which will provide important intelligence to many.
Tomorrow's People would like to be able to carry out more work in this area, and in particular to be able to provide debt advice and develop financial literacy support in East Sussex and elsewhere. But as the study has highlighted, as a charity to do this we need funding. In order to take this forward we are establishing a working group with representatives from Tomorrow's People, Jobcentre Plus Hastings, the University of Brighton and the Hastings and St Leonards Citizens' Advice Bureau, and any other interested parties. There clearly is a need for investment in this field which could bring an enormous return to society by helping people rebuild their lives and realise their full potential."
Professor Peter Ambrose, the report's author, said: "It is relatively easy for those on low incomes to get into debt if a major change in life circumstances such as redundancy, ill-health or relationship breakdown occurs.
Once deeply in debt the effects are cumulative and it is very difficult to break out of the cycle. The adverse health effects stemming from debt are varied and serious and are exacerbated by the severe restrictions on lifestyle and social contact experienced by those in deep financial difficulties.
In addition there is an indirect adverse health effect in that debt has been shown to be an important impediment to entering work and for many people useful employment is, in itself, a source of increased income, social contact and self-fulfilment.
It is probably true to say that virtually everyone interviewed, except those at or above retirement age, would in principle like to be working and were planning to return to work where possible to use their talents. And yet debt was quoted as the impediment to employment by nearly 38% of survey respondents. Those interviewed identified the three main barriers to employment as debt, childcare and the 'poverty trap'.
Debt was a barrier identified by those at all stages of dealing with their debt. It was a barrier in terms of the amount of emotional energy the issue took and a fear of earnings being 'attached' by creditors.
It is clear early and expert advice from agencies such as the Citizens' Advice and Tomorrow's People is extremely helpful in informing debtors more fully about the situation and in rescheduling debts either in court or less formally.
The explosion of household consumer debt serves the commercial interests of lenders and the methods used reflect an aggressive battle for market share. No doubt the rapid increase of credit serves to 'stimulate the economy'. But it also produces adverse social and economic effects that are clearly generating very widespread hardship and substantial, but so far unmeasured costs to a number of public budgets. We need to have a much clearer idea of what these costs amount to. The significance of this issue far outweighs the amount of research that has so far been devoted to it."
Contact: Marketing and Communications, University of Brighton,
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