The A4e Blog: Addressing the wider impact of debt

Wednesday 25th May 2011

In the second installment of his two part blog, A4e Executive Chairman Mark Lovell takes a look at what needs to be done to address the wider impact of debt:

In my last blog I looked at what needs to be done to tackle the root causes of debt. As I mentioned, the issue is twofold and as well as combating the root causes of debt, we need to address the wider implications of it.

Debt advice needs seamless links into clearly associated services of support that will prevent debt arising. We need to move to more effective prevention services, as often issues manifest are unrelated to debt problems - if these were tackled earlier, a descent into crisis could be prevented.

A core part of addressing these wider consequences through more joined up services relates to the impact on wellbeing. Studies have long linked poor health and poverty. We know debt is a big factor in depression and other health related problems. In 2008, I commissioned an independent evaluation into one of our debt advice services - the findings are sobering:

• 83 per cent of our customers described themselves as being extremely stressed because of their debt problems

• 53 per cent were suffering from clinical depression with strong links made to their financial situation

• 48 per cent said their relationships were strained because of debt

• 33 per cent had said they had even contemplated suicide with a number referencing actual suicide attempts

• Over 90 per cent of the working age population in these households was unemployed and generational poverty & worklessness rife.

Such stark evidence requires a rethink of how we link broader support services together. My concern is for those people who deskilled in the recession, stayed in work but have mortgages and other debt obligations. As interest rates rise, these are the most at risk group of becoming long term unemployed and manifesting a range of other problems, the biggest of which will be indebtedness. In one of our services over 60 per cent of debt advice consumers were 'lower middle income' earners, a 'squeezed middle', with unmanageable debts averaging at over £12,000 per customer.

The debt advice and financial services sector must become better integrated - together with accessible health related services, housing support, family support, social services and welfare to work programmes. Access to these ‘holistic’ services should be through a unified, personalised view of the customer, not just simply passed from pillar to post in a complex referral and sign-posting network.

A clearer focus on joined up services and prevention is needed in this industry and from governments. Society will continue to bear the cost in so many ways if we cannot step up and address this challenge. If we can do this and address the root causes of debt then I am confident we can start to move forwards.