18% of Britons regard themselves as being in 'serious debt'

Katija Dew, Programme Director for Financial Inclusion at the Wales Co-operative Centre, reflects on all things borrowing and debt in light of new research published today by the Money Advice Service.

So, according to the Money Advice Service who launced their ‘Indebted Lives’ report today, that’s almost 9 million people across the UK that can’t pay and feel a ‘heavy burden’ of debt.
For the research, 5000 people across the land were interviewed about money management.  The data and findings in the report were both shocking and compelling.

Let’s start at the beginning.  What is the difference between credit and debt? In essence, credit is borrowing that is manageable and being repaid.  When it can’t be paid back as per the contract, it becomes debt.

Hardly a day goes by without headlines about payday lending, debt and money troubles.  But are we taking enough notice of the warnings?  It seems that some people are, and others are not.  Credit unions report to me a reduction in the number of applications for moderate to large sized loans.  Some people are reining in their spending but at the same time we hear in the news that a higher proportion of earning, young unmarried men with no children are borrowing from pay day lenders…and then having difficulty repaying.

This is worrying, and it begs the question, what are we storing up for the future?

The mood at the report’s launch was helpfully analytical with a pragmatic debate about possible solutions.

For example, the Resolution Foundation’s analysis of the data helped with my musings about how some people are borrowing more and others are borrowing less.  It seems that, since 2012, those with a ‘higher financial net worth’ (ie that own more) are borrowing less.  Those with a ‘lower financial net worth’ are borrowing more.

In addition lower income households in debt typically owe many multiples of their income, where higher income households owe a higher value but this is a lower percentage of their income.  So, lower income households worry much more about the amount they owe, which will be much more of a struggle to pay off.

This data is going to be extremely valuable and will take some time to wade through.

Whatever the detail, we know that debt is increasing.  We know that when people seek help that they need it quickly, and that financial capability is a consistent message that we come back to, time and again.

Katija Dew
Financial Inclusion Director, Wales Co-operative Centre