Problem Debt Costing the UK £ 8.3 Billion
A new report from charity, StepChange, was released this morning on the issues of ‘problem debt,’ stating it costs the UK £8.3 billion.
The Social Costs of Problem Debt
- £89 million due to worse education and employment outcomes for young people.
- £19 million due to poorer physical health.
- £5 million due to increased ‘desperation’ crime.
- £2.8 billion cost of losing a home or being evicted.
- £2.3 billion costs due to job loss or lost productivity.
- £960 million mental health costs.
- £790 million relationship breakdown costs.
- £658 million extra costs of older people needing to move into care homes earlier.
- £443 million cost of employees in small businesses losing their job.
- £229 million costs due to increased risk of children being taken into care.
Mike O’Connor, CEO of StepChange, said:
“Many people are plagued with severe financial worries that can have a huge impact on their health.
“All too often, people face their debt burden alone, which can worsen the anxiety they are feeling. We would encourage anyone who is struggling with debt to take that first step and seek free confidential advice.”
The report was carried out by Baker Tilly, analysing the data of 109,397 StepChange customers. The charity saw a 37% increase in clients seeking debt advice between 2012-13, and are expecting a further 20% increase in the 2014 Statistics Yearbook. With an estimated 2.9 million people in the UK facing problem debt, the report suggests that if the 2.9 million could find help a “conservative” estimate of £3.1 billion could be saved in social costs.
“Problem debt is a brake on people’s capacity to work, or to return to work, a brake on aspiration and a brake on potential. The impact affects us all and we cannot afford to walk on by.” – Mike O’ Connor, CEO of StepChange.
Debt Action Plan
The result of the findings is a call from the charity for the Government to commence a Debt Action Plan, which includes:
- Savings help for people on low and middle incomes to build up precautionary savings.
- A new statutory scheme supporting people through temporary financial difficulty, accessed via debt advice.
- Government committing to the highest standards in debt collection practice where it acts as a creditor, e.g. council tax collections.
- Helping the free debt advice sector bridge the advice gap so that everyone who needs help with their debts is able to get debt advice.
- Providing proper funding for the tools to help people manage their debt, so that debt advice can help as many people as possible.
A Treasury spokesperson stated:
“A key part of the Government’s long term economic plan is to boost hard-working peoples’ financial security at all stages of life.
“That’s why we’ve taken action to deliver the biggest ever increase to the annual subscription limits for Isas, a radical overhaul of pensions so that people can access them more flexibly, and major changes to the starting rate of savings income tax which will benefit over 1.5 million people.
“The Government has taken a series of steps to help those with problem debt, including giving the Money Advice Service (MAS) responsibility for funding and coordinating the free debt advice sector, and giving the Financial Conduct Authority robust powers to protect customers that use debt management firms.”