Maxed Out: UK Debt Linked To Mental Illness Increase
A new report entitled Maxed Out ‚Äď Serious Personal Debt in Britain by the UK ‚Äúthink tank‚ÄĚ The Centre for Social Justice has found that personal debt is spiraling out of control, leading to increased levels of mental health problems. The Centre was set up in 2004 by the then Conservative Party Leader Iain Duncan Smith to investigate and to advise upon serious levels of deprivation in the most disadvantaged areas of Britain. The Centre helped in forming social policy for the Tory 2010 Manifesto.
Smith underwent something of a ‚ÄúDamascene conversion‚ÄĚ in 2004 when he was reportedly reduced to tears during a tour of Britain‚Äôs poverty black-spots. ¬†He saw ‚Äúlevels of social breakdown which appalled me‚ÄĚ and ‚Äústunningly low levels of life expectancy.‚ÄĚ He promised to help many of those he met. Out of all this came the CSJ. At the time, this was seen as part of the re-branding of the Tory party, often referred as ‚Äúde-toxifying‚ÄĚ the party‚Äôs image as the ‚ÄúNasty Party.‚ÄĚ Now commonly known as ‚ÄúIDS,‚ÄĚ Smith is the current Coalition Secretary for Work and Pensions and presides over controversial Welfare reforms.
The CSJ Maxed Out study has found that the poor are ‚Äúbearing the brunt of a storm‚ÄĚ that has seen unsecured consumer debt reach nearly ¬£160 billion ($204 billion), almost three times higher than it was 20 years ago. Indebted households in the country‚Äôs poorest 10 percent have debts which on average are four times their annual income. Debt repayments often account for almost half of a family‚Äôs monthly income. Total personal debt — which includes secured borrowing and mortgages — has now reached ¬£140 trillion ($224 trillion), a figure that is alarmingly close to Britain‚Äôs total national economic output.
The report points to a direct link between debt-fuelled poverty and increased incidence of ‚Äúanxiety, stress and depression‚ÄĚ leading to social exclusion and, in extreme cases, suicide. Those with no previous history of mental illness were ‚Äú33 per cent more likely to develop a mental health issue‚ÄĚ when trying to cope with serious debt. 70 per cent of those seeking debt-advice were on prescribed medication for mental health difficulties and one in three had contemplated or attempted suicide. While much of this is clearly down to the global economic downturn since the banking crash along with rising living costs and falling real incomes, there has always been a two-way relationship between debt and mental illness. Adults with mental health conditions are ‚Äúthree to four times more likely to have a debt problem‚ÄĚ than the rest of the population.
The number of households now at a debt ‚Äúcrisis point‚ÄĚ is said to be in the millions and family breakdowns are on the rise. Over 5,000 people are being made homeless each year because of debt. Local authorities have recorded that more than 26,000 households have been made ‚Äúhomeless‚ÄĚ due to rent or mortgage arrears.
Another significant factor driving the crisis is the problem that poorer families face when trying to access normal financial routes for borrowing. CSJ Director Christopher Guy said these people were ‚Äúcut off from mainstream banking and have no choice now but to turn to loan sharks and high-cost lenders‚ÄĚ. This is witnessed by the massive growth of UK ‚Äúpay day loan‚ÄĚ companies who often charge huge levels of interest that often serves to make the situation worse for the most vulnerable. Over 1.4 million do not have access to traditional bank accounts and are ‚Äúeffectively excluded from the entire financial sector‚ÄĚ. Having to turn to the high-charging alternative lenders means they pay what the CSJ describes as a ‚Äúpoverty premium‚ÄĚ of ¬£1,280 a year ($2,048), the extra they have to find for interest along with everyday goods and services.
While politicians in the UK talk of an economic recovery getting underway these massive debt levels and the devastating effect on ordinary lives are a constant reminder of what can go wrong when debt is out of control.
Note: Dollar conversion based on a $/¬£ rate of 1.6 ‚Äď an approximation of the mid-rate on November 25, 2013.
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