In my work on combating child poverty in the UK I have been looking at what we can do to help people avoid serious personal debt.
Around 9 million people in the UK are in serious debt and British consumers are twice as indebted as people in Europe.
Inadequate incomes clearly lead to debt but debt is both the cause and effect of other social problems, such as unemployment, addiction and family breakdown.
Greater numeracy and financial literacy skills would prevent people from getting into serious debt. I would like to explore how budgeting and interest calculations could be incorporated into the examples used to teach maths in school. The party has committed to launching a free National Financial Advice Service, paid for by a levy on the financial services industry. believe that part of its role needs to be to challenge public attitudes towards debt and saving, both of which have shifted considerably for the worse over the last sixty years.
We will also create a Consumer Protection Agency to provide tougher consumer protection for financial services customers. We would also penalise retailers whose store cards charge over 25% interest, as many store cards charge double the average credit card rate.
A further urgent task is to expand the provision of affordable borrowing to those who need it most. We would like to see the expansion of community based credit unions and other social lenders such as community development finance institutions. We will also look at how the Social Fund could work more effectively, including with those who are currently excluded from its loans and grants.
I also believe that the quality of debt counselling is much too variable around the UK with some debt counsellors achieving less good outcomes than the best in the field. One organisation that I visited which has particularly impressed me is Christians Against Poverty (CAP), based in Bradford, but with local centres around the UK. Their service is free to users and many choose to keep their CAP account even after they have become debt free.
This is the experience of one of their customers. Soon after Janet left work to have her fifth child her husband lost his job. The couple got behind with their bills and were almost evicted. They took out another loan to make ends meet. Janet used to go for days without food and her marriage hit rock bottom. She went to see her doctor because she was crying all the time. He prescribed anti-depressants and gave her a CAP leaflet.
An adviser visited Janet at home the next day. They went over the paperwork together and the adviser called all the creditors to get them to freeze all interest and charges. A week later Janet had a CAP account and a budget of what to pay off and when. Janet said “It had realistic amounts to pay off our debts and still put food on the table and a small amount for savings – it was unreal.”