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News News Archive 2010 Debt recovery?
News News Archive 2010 Debt recovery?
Debt recovery? |
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| Monday, 27 September 2010 |
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We are delighted to publish the second article in our series looking at issues related to work, money and recovery. With the first article a number of people joined the debate by leaving comments and voting in our employment poll. In all, 374 people voted in the poll and an overwhelming 94% agreed or strongly agreed that paid employment can support recovery. In this second article, consultant and trainer, Chris White, examines the relationship between debt, mental health and recovery and highlights useful supports and initiatives . It's hard not to have noticed recently that Britain is in debt, with politicians and economists taking every media opportunity to talk about the UK's £816 billion national debt. Chancellor, George Osbourne, has said that “everyone will need to pay something". The government is keen to reduce the £192 billion welfare bill, a move which the Institute of Fiscal Studies argues makes the budget less than fair, with proposed benefit and tax credit changes meaning that the poorest households will see their incomes fall greatest. The government may want to promote economic recovery, but what does debt mean for those people living on the lowest levels of income? Research has consistently highlighted that debt can seriously affect our mental health. However, evidence from SRN’s narrative research project has shown that addressing debt issues can be empowering and promote recovery. For example, one person said that addressing their £12,000 debt, in small weekly amounts and with support helped them to feel better about themselves as “every week (they) could see the debt was coming down”, making them “feel proud that (they) were paying their way again”[1]. In 2003/04, a fifth of people in Scotland were living in poverty, in almost a third of the household in poverty someone was in paid work, but the majority of people were not and either sick, disabled or lone parents. In fact, disabled adults in Scotland are twice as likely to be in poverty than non-disabled adults[2]. High interest short term unsecured lending is clearly growing in the UK. High street shops are closing and being replaced by a multitude of cash advance and cheque cashing centres lending an estimated £1bn a year. You don't need to leave home to arrange a quick loan, although this may come at a cost. Companies like QuickQuid and Wonga legally advertise on TV and online unsecured loans with typical APR in the region of 2689%[3]. Loans are not the only option available for people desperate for money quickly, walk along your local High Street and you can sell anything from HiFi's to gold rings to help make ends meet. As people struggle pawnbrokers are making a comeback and flourishing. H&T, Britain's biggest pawnbroker, announced a 71% rise in profits over the first 6 months of the year[4]. Research shows six out of ten people who use pawnbrokers are not in work and use the money to buy essentials such as food[5]. The recession has led to people across the country losing their jobs, threatening their financial security causing anxiety and fear about their futures, but debt can already be a reality for people experiencing mental health problems. There are also clear links between debt and mental health. 23% of people with a mental health problem are in debt, compared with 8% of those without a mental health problem, and 1 in 10 people with a mental health problem have had a utility such as their gas or electricity disconnected[6]. People living on low incomes are more aware of the financial challenges they face than the rest of the population – but they are also less likely to act upon it[7]. Citizens Advice Scotland has seen a 50% increase in consumer debt levels over the last 5 years and in 2007/08 the Scottish Bureaux dealt with £198 million of debt, the majority of people coming from low income households, often living with an illness or disability. 70% of CAB clients were living on less than £1200 per month and regardless of whether or not they were already living with an illness, nine out of ten clients said debt had a negative impact on their health, particularly their mental health[8]. Bad debts can lead to or exacerbate existing mental health problems. Unaddressed the situation can only get worse, final demand letters, distressing telephone calls from debt collectors, threats of court action or eviction can only lead to people feeling more unwell and isolated, but seeking help can reduce stress and aid recovery. The Scottish Government has recognised that money advice and information services tackling debt issues are key to reducing poverty and social exclusion[9] and have invested in the training and funding of advice workers. Across the UK the Royal College of Psychiatrists (RCPsych) have been working with both the advice and finance sector to provide resources, tools and guidance around debt issues. Final Demand published in 2009 is a guide aimed at social care workers to help them recognise some of the signs of a debt problem and how to offer support to help people begin to address the problem. People often report that when they tell collection agencies that they have a mental health problem this has little or no effect. In 2008 the Money Advice Liason Group (MALG) launched the Debt and Mental Health Evidence Form. The form can be used by healthcare professionals, debt advisers and creditors to more effectively evaluate debtor circumstances and arrive at informed decisions. New Guidance from the Office of Fair Trading on Irresponsible Lending strongly recommends the use of the Debt & Mental Health Evidence Form as an appropriate means of obtaining evidence from consumers experiencing mental health problems[10]. Money Advice workers in Scotland have much more awareness now about mental health issues thanks to the work of Money Advice Scotland (MAS). Over the last two years (MAS) have promoted the use of the Mental Health Evidence Form and provided training and seminars on debt and mental health issues to help advice projects across the country provide a better service. Tackling debt problems is never simple, but doing so can support recovery. Also, with the investment in money advice and information services it is becoming easier for people to deal with debt. One person with debts of over £75,000 has said, “It hasn’t been at all easy, but little by little we are climbing our way out of debt. There are still amounts to be paid back or negotiated with the creditors, but I now feel I have the strength to fight for a solution”[11]. [1] The Bottle, the Dog and the Three Musketeers;Scottish Recovery Network – Narrative Research Project, 2005. [2] Palmer, Carr and Kenway; Monitoring poverty and social exclusion in Scotland, 2005. Joseph Rowntree foundation. [3] www.wonga.com advertised typical APR Sept 2010. [4] The Stock Market Reporter, 24th August 2010. [5] Pawnbroking customers in 2010: Collard and Hayes; University of Bristol. August 2010. [6] Debt, income and mental disorder in the general population; R. Jenkins et al. Psychological Medicine (2008), 38:1485-1493. [7] Closing the Advice Gap: Providing financial advice to people on low incomes Resolution Foundation, 2005. [8] Drowning in Debt; Citizens Advice Scotland; June 2009. [9] Gillespie et al; Money Advice for Vulnerable Groups: Final Evaluation Report. Scottish Executive , 2007. [10] Office of Fair Trading Irresponsible lending – OFT guidance for creditors OFT1107 August 2010. [11] Final Demand; Royal College of Psychiatrists; 2009. ResourcesYou can find your nearest money advice project by contacting Money Advice ScotlandYou can acces Debt and Mental Health Resources via the Money Advice Trust - including Final Demand, Debt and Mental Health Evidence Form, and other resources. You can find information on money, debt and benefits including detail on how to manage debts on Rethink's website. Related linksRead the introduction of to this article series and the first article entitled, International evidence supports the link between employment and recovery. |
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