According to StepChange, there are around 750,000 families across the UK where debts have become such a regular burden that many are in danger of treating them as a so-called “new normal”.
Research carried out by the money charity found that around 2.6 million Britons have a severe debt problem. While this is a fall of around 300,000 since 2013, the number of families with children facing this issue has jumped by 16% to three-quarters of a million. Those earning between £15,000 and £35,000 are most likely to have problems with cash flow.
StepChange was keen to highlight the range of issues facing families in 2015 and beyond, claiming that the expansion of zero-hours contracts, the rise in self-employment and other insecure work agreements has left people on the precipice of “income shocks”. These are when employment could come to an end, or at least see someone receiving reduced hours, and can have a massive impact on people if debts remain the same on a month-to-month basis.
In the last year, the not-for-profit estimates that nearly three in every four people who had problem debt turned to credit cards and overdrafts, and borrowed money from family or friends. One in five people had used high-cost credit, foodbanks or credit unions to maintain a passable standard of living.
Chief executive of StepChange Mike O’Connor said: “People have always faced ups and down in their incomes, but the changing nature of work means that income shocks are now a regular feature of more people’s lives. These changes may be here to stay and social policies need to reflect the new normal. Our social policy is not keeping up with our economic policy.
“We need mechanisms and safety nets that will ensure that a drop in income doesn’t precipitate a rapid fall into problem debt. People, especially those on low incomes, need more help to build precautionary savings.
“Our welfare system should respond to people’s needs and help them cope with short-term ups and downs so that a temporary change in circumstance does not become a serious and entrenched financial problem.”
StepChange was previously known as the Consumer Credit Counselling Service (CCCS), and since its inception it has helped over two million people overcome problem debt with free and impartial help.