Full report
Summary
There was no money to save up, the property was unfurnished, barren and cold, it had nothing. The only thing it did have was a bathtub and I was washing my clothes in that.
Ben shares his experience of debt in the report. He is now helping others as a CAP Debt Coach.* *Name has been changed
Key findings
For households at risk of falling below the Minimum Income Standard (MIS), household bill arrears was the debt that posed the most significant risk.
Certain types of debt (i.e. credit cards or loans), however, could smooth out income and help households stay above MIS.
Across all households, the risk of falling below MIS went up as the debt-to-income ratio increased, reaching a ‘tipping point’ where the risk became more pronounced.
CAP recommendations
CAP is calling on the Government to review the rate of social security and wages against the Minimum Income Standard, to analyse its adequacy and adjust as necessary.
CAP is calling for Government, Local Authorities and the credit industry to use the findings in this report, such as the fact that those households with bill arrears are highly likely to be living below the Minimum Income Standard, to help inform their anti-poverty strategies.
CAP is calling on the debt collection industry to ensure that debt collection activity is informed by a household’s ability to pay.
CAP is calling on the Government and Local Authorities to:
- Make debt deduction rates from benefits more affordable and ensure that people are left with enough income to afford the essentials.
- Conduct an affordability check before applying a deduction on income.
CAP would like to see the Government:
- Increase the minimum living wage to meet the Minimum Income Standard.
CAP would like to see businesses commit to becoming Real Living Wage employers.
CAP is calling on debt collection departments to ensure that adequate forbearance policies are put in place to support customers experiencing life events.
CAP would like to see Government and businesses go beyond signposting by embedding tools such as benefits calculators within websites and customer journeys.
Approach
Debt is both a symptom, as well as a driver, of poverty, but how does household debt interact with living standards? We’ve partnered with the Centre for Research in Social Policy (CRSP) from Loughborough University to delve deeper and answer this question.
Using the Minimum Income Standard (MIS) as a measure of living standards, Pushed under, pushed out looks at how debt type, levels of debt repayment, life events and long-term low incomes puts people more, or less, at risk of falling below MIS.
Full academic report
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