The rise of personal debt in London

Dolly GalvisHead of Advice Services

Toynbee Hall

Capitalise London Debt Advice Partnership

• Toynbee Hall is the lead partner of Capitalise, a London-wide partnership of organisations funded by the Money Advice Service to provide free face-to-face debt advice to Londoners who are experiencing or at risk of financial exclusion and debt

• 26 organisations are part of the Capitalise partnership, including Citizen Advice Bureaux, Law Centres and independent charities.

• Supports more than 21,000 service users every year.

Capitalise Number of Clients Seen Apr - Oct 2012 and Apr to Present 2013 comparison

Most common debt type Priority Debt

– Council Tax Arrears – Rent Arrears – Mortgage Arrears – Utility Bills/Electricity & Gas– Magistrates / Sheriffs Court

Fines – Maintenance or Child Support – Other Secure Loans Arrears– Parking Penalty Charges

Non-priority Debts– Benefits Overpayment– Water Bill Arrears – Business Debts – Hire Purchase– Income Tax and NI debt – Social Fund – Student Loan – Debt Unsecured – Credit Products Arrears

Context for families

1. Rising costs, static income = financial instability2. Growing incidence of income shock - loss of overtime,

reduction in hours, unemployment, sickness3. Income shock triggers unmanageable debt4. Poverty premium – utility costs, access to credit5. Impact of isolation - shortage of money & short-term/payday

loans 6. Rational choices – food, bills or heating7. Highest risk appears to be for lone parents

External context• Funding cuts – especially benefits, employment & housing

advice – emergence advice deserts• Work appears to be deteriorating, not just wages but also

conditions• Welfare reform – bedroom tax, Social Fund, benefit cap =

income trigger & forecast to increase instability• Private rented housing sector growth and rent increases – the

most isolated and vulnerable households , situation likely to be exacerbated by cap-flight from 2014 onwards

The grim reality• Family with two children – Private rented • Income £1,243.76 (monthly)• £643.76 Wages + Child Benefits £134.00, CTC £470.00, they also received CTB and HB • Expenses (monthly)

– £270.00 Rent– £55.00 Council Tax– £60 Gas– £60 Electric– £12.20 TV License – £55 Telephone (mobile and broadband)– £100 Travel– £25.56 Water– £20.00 debt repayment (Total debt £7,263.52 – 5 creditors) – Total = £657,76 – Amount left for housekeeping, food and other expenditure = £586pm (TF£729)

The grim reality• Single parent with two children• Income £362,00 (monthly)• £228 JSA (after £61.60 Social Fund repayment) + Child Benefits £134, she also

receives CTB and HB – CTC suspended • Expenses (weekly)

– £53,82 Rent– £11.66 Council Tax– £40 Gas– £40 Electric– £12.50 TV License – £40 Telephone & Mobile– £20 Travel– Total = £217.92– Amount left for housekeeping, food and other expenditure = £144.08pm (TF

£507)

Destitution equation• Triple whammy - rising costs, falling income, diminishing

safety nets leading to increasingly individualised solutions;

• Food bank growth• Pay day loan growth• Grants for people in need growth

We could do more together nationally

• Evidence• Local leadership and change• Campaign for national change• Sharing impact and best practice

Questions