Personal debt

Personal debt in the UK stood at £1.5 trillion at the start of 2011. As such, it represents an important influence on the wider economy as well as being an unsustainable burden to many individuals. Although personal debt is now more socially acceptable than it was for previous generations, the economic downturn is making it harder for individuals to service existing debt as loan rates are still prohibitively high despite cuts to interest rates. This is compounded by the need by many to take on unsustainable debt for necessities, sometimes from expensive short-term lenders. The burst of the housing bubble has also left many people struggling to pay unaffordable mortgages. Long-term funding for face-to-face debt advice (e.g. by Citizens Advice Bureaux) is uncertain.

What are the implications?

  • Growing poverty and inequality as those with lower incomes are more likely to get into debt.
  • A continued rise in repossessions as growing numbers of people are unable to pay their mortgages (see Housing market).
  • Unsustainable personal debt may lead to a rise in numbers of homeless people.
  • Decreased consumer spending and confidence which may deepen the recession and increase the risk of deflation.
  • Interest rates remain low in an attempt to stimulate consumer spending and kickstart the economy.
  • Further pressure on lenders to lower interest rates on loans.
  • Increased levels of debt may impact on levels of individual giving.

Moving forward

Organisations offering debt advice will face an increasing demand for services at a time when funding is threatened.

  • How can you ensure your funding is sustainable?
  • Do you have the resources to work with larger numbers of beneficiaries?
  • How can you prioritise when the demand for your services exceeds your capacity?

Organisations that work with homeless people or with those in poverty may find there is greater demand for their services.

  • Do your new beneficiaries need different services, for example in terms of housing or employment advice?
  • Could you collaborate with other organisations to cope with the increased numbers and provide a wider range of services?

High levels of personal debt have a significant impact on the wider economy.

  • What strategies can your organisation put in place now to manage potential future changes in funding?
  • Can you take advantage of lower interest rates to renegotiate your organisation’s debt?

Want to know more?

Over-indebtedness report

Published by: National Audit Office, an independent Parliamentary body responsible for overseeing government activity.

Date: Jan 2010

Format: PDF

What is it? A 43-page report giving a detailed account of the evidence for debt advice as a means of managing over-indebtedness. It provides data on the cost and effectiveness of debt advice, as well as extensive policy recommendations.

How useful is this? This report would be of particular interest to organisations providing debt advice and may be particularly valuable when campaigning or applying for funding. It could also be of interest to other organisations such as homelessness charities planning for scenarios in which the funding for debt advice is cut. The report is rather technical in places but a useful 4-page executive summary is included.

When Times are Tough: Tracking household spending and debt through diaries – interim findings

Published by: IPPR (Institute of Public Policy Research)

Date: August 2009

Format: Report

What is it? A report discussing IPPR data on spending by low-income families. It forms part of a wider project on consumer culture and debt.

How useful is this?  The report draws on data from detailed diaries on weekly spending filled in by 58 low-income families with dependent children, in London, Newcastle, Nottingham and Glasgow. Key challenges include, rent, bills, debt repayments and Christmas, with profligate personal spending being notably absent from most accounts. The findings of the report give a helpful counterbalance to the idea of widespread inappropriate spending and debt.

Monthly debt statistics

Published by: Creditaction

Date: Monthly

Format: Web and PDF (the latest release can be found under the 'statistics' heading on the home page)

What is it? A collection of a range of statistics on UK personal debt.

How useful is this? A useful free source of information which is updated monthly. It includes a number of 'striking numbers' which help to bring the statistics to life.

Last updated at 16:19 Wed 30/Mar/11.

Recent comments

Megan 's picture


Third Sector Foresight

According to a recent populus poll for the times, 94% of the public are confident that they will be able to keep up with their rent or their mortgage in 2008, while four out of five say they will be able to reduce their non-mortgage debt in 2008. Populus report that this confidence chimes with recently released repossession data which showed that there were actually 10% fewer repossessions than predicted in 2007.

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How will this affect your organisation? Have you considered it during your strategic planning? Can you share any interesting relevant links?

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