On this second day of National Family Week, Relationships Foundation highlights the pressure put on UK families by debt.
The UK has the highest number of families with ‘critical debt’ in Europe. According to Eurostat figures, 13.9% of British families (1.05 million) have debt equal to more than 100% of their monthly take home pay.
Between January and May 2011, UK families with two or more children have seen their average unsecured debt increase by nearly a fifth, from £5,248 to £6,200 (Aviva figures). Research by Moneysupermarket.com suggests that 5 million Britons are currently living permanently in the red. Swiftcover, polling 1,500 people, recently found that more than four in 10 Britons are made miserable by debt.
The European average is just 2.3%. Polish families have virtually no highly critical levels of debt.
Money worries are a major source of argument and relationship conflict.
• A 2007 YouGov survey found that 10.7 million people suffer relationship problems because of money worries.
• A 2007 report by the Legal Services Research Centre found ‘debt problems can bring about ill-health, relationship breakdown and loss of employment’ and bring ‘particularly distressing impacts on parents’ relationships with their children’.
• A 2006 survey for the FSA found that over a quarter (27%) of couples regularly argue when they try to discuss their finances.
• A 2002 report for the DTI found that one in twelve households experienced relationship problems as a result of financial difficulties.
• Bright Grey published a poll on 21st May 2011 which found that money comes second only to sex and death as a taboo subject for discussion.
The Government’s Foresight Report into mental wellbeing suggested that debt is a much stronger risk factor for mental disorder than low income.
In its recent report card on the Coalition’s performance, the Centre for Social Justice gave the Government just 6/10 for tackling serious personal debt.
Commenting, Michael Trend, Executive Director of the Relationships Foundation, said:
“With some of the worst personal debt levels in Europe, we are a long way off being the most ‘family-friendly’ country in the continent.
“The numbers are eye watering, and behind each statistic is a family under pressure. That pressure can break up families, at a cost of £42 billion to the British Taxpayer every year.
“If family-friendliness is to be more than a fuzzy phrase, the Government need to come forward with a tough strategy for combating the pressures families face.”
Notes to Editors
• The figures are part of Relationships Foundation’s Pressure Gauge. Debts such as mortgages are not necessarily a pressure on families if repayments are affordable. Eurostat provide a measure of ‘highly critical’ debt burdens which looks at the amount owed in arrears for housing bills/repayment, consumption loan/credit repayment and other non housing bills. In addition, the outstanding amounts were recorded for bank overdrafts and credit and/or store card(s). The ‘highly critical’ debt burden is defined as such debts amounting to more than 100% of the households’ monthly disposable income. Although the scale was not strictly additive it was possible to characterise the overall degree of the household financial difficulties when aggregating the different dimensions. For instance, a household can be said to be in a ‘critical’ situation with respect to arrears if the household had a debt higher than its monthly disposable income in one dimension or in the combination of various dimensions.
• A recent report from Aviva highlighted the growth in household debt:
o “While the typical family has sought to pad out its savings cushion, the average credit card/loan/overdraft debt has actually increased from £5,360 (Jan 2011) to £5,878 (May 2011). One of the main drivers behind this trend appears to be families with children. Indeed, families with two or more children saw their average unsecured debt increase from £5,248 (Jan 2011) to £6,200 (May 2011) and families with one child saw theirs increase from £4,404 (Jan 2011) to £5,452 (May 2011).
o “The cost of servicing debt as a percentage of household income has also grown from 8% (Jan 2011) to 10% (May 2011). This may indicate a desire to pay off unsecured debt but the figures seem to indicate that it may simply be servicing increasingly expensive borrowing.”
• Average Household income after tax and benefits in 2009/10 was £31,000, or £2,500 per month (ONS)
• At the end of July 2010, personal debt in the UK stood at £1.46 trillion, as much as the nation’s GDP. Including mortgages, every adult in the UK owes an average of £29,918, while every household an average of £57,789. Figures from the Office for Budget Responsibility quoted in Fox & Co. “10 Debt Facts on UK Personal Debt 2010”.
• In March, Moneysupermarket.com published an Opinion Research poll of 2,050 adults suggesting that 5 million Britons are permanently in the red.
• The FSA survey is here, and the DTI report Over-indebtedness in Britain: A report to the Department of Trade and Industry here. It found a clear link between friction in the household and the extent of financial difficulties being faced. A third (34%) of households in this study who were in financial difficulty said that money was a source of friction, compared to 14% of households with no financial difficulties at all. The Yougov Survey is available in Breakdown Britain from the Centre for Social Justice, p. 19. The LSRC report is Pascoe Pleasance, Alexy Buck, Nigel J Balmer and Kim Williams. A Helping Hand: The impact of debt advice on people’s lives Legal Services Research Centre Research Paper No. 15, 2007, p.i. The Government’s Foresight Report into mental capital and wellbeing suggested that debt is a much stronger risk factor for mental disorder than low income (p. 19).
• A recent report by Bright Grey found that talking about money is one of the least popular discussions in British homes. The Women and Protection report found that money comes third behind sex and death as a taboo subject.
• A new ‘Life Index’ from Swiftcover, polling 1,500 people, found that more than four in 10 Britons are made miserable by debt. Petrol prices (61%) and personal finance (42%) were the top concerns. 58% said they were ‘concerned’ and 25% ‘extremely concerned’ about the action (or lack of action) being taken by the Government.
• The CSJ report card is here. It applauded £73 million to develop Credit Unions, but said that ‘the Government has not set out a new vision for helping those in serious debt’ (p.10).
• The Conservative Manifesto listed ‘the lack of time, money worries, the impact of work, concerns about schools and crime, preventing unhealthy influences, poor housing’ (p. 41) as pressures on the family. It pledged ‘to make Britain the most family-friendly country in Europe’ (p. viii). As recently as May 4th 2011 Sarah Teather, the (Liberal Democrat) junior minister with responsibility for family policy, told the House of Commons: “It is vital that we support families as much as we can, and this Government believes that we should do much better. It is our ambition to make this country the most family-friendly in the world.”