Personal debt is fuelling a host of social problems, including mental illness and family breakdown, according to a report by the Centre for Social Justice (CSJ).
The CSJ’s report, Maxed Out, found that personal debt in the UK remains close to its all-time high at £1.4 trillion. Also, indebted households in the poorest 10% of the country have average debts more than four times their annual income. Average debt repayments within this group amounted to nearly half their gross monthly income, the report highlights.
It also found that many people are forced to take out loans because of low financial resilience. For example, 3.9 million British families do not have enough savings to cover their rent or mortgage for more than a month.
This is having a serious detrimental effect on those affected. Christian Guy, director of the CSJ, said: “Years of increased borrowing, rising living costs and struggling to save has forced many families into a debt trap that is proving very difficult to escape.
“Problem debt can have a corrosive impact on people and families. Our report shows how it can wreak havoc on mental health, relationships and wellbeing.
“Across the UK people are up until the early hours worrying about their finances and bills.”
Chris Pond, who leads the CSJ and is a former PPS at the Treasury under Labour, chaired the report and said problem debt carries a major human cost. “With falling real incomes and increasing costs of basic essentials, many – especially the most vulnerable – are sliding further into problem debt.
“The costs to those affected, in stress and mental disorders, relationship breakdown and hardship is immense. But so too is the cost to the nation, measured in lost employment and productivity and in an increased burden on public services.”
Greg Aitken, CEO of Hull and East Yorkshire Mind, said he endorsed the report’s findings: “It will be no surprise that our region mirrors the findings of Maxed Out. Most worrying is that at a time of increased debt, joblessness and homelessness, we are witnessing greater cutbacks to support services for the vulnerable.”