Debt and its impact on our communities
by Mike Kane MP for Wythenshawe & Sale East
There is a wealth of evidence around the issue of problem debt and its impact on our communities. In my constituency alone there are more than 16,000 people who are ‘over indebted’*. Yet we have seen little action from Government to address the multiple and complex issues which cause it.
A recent report by the Money Advice Service revealed that renting a property indicates that you are twice as likely to be over-indebted as those owning their home. With 1 in 4 people renting being over indebted. For those renting a social housing property this increases to nearly 1 in 3.
Debt has become a ‘significant problem’ for an estimated 4,920 families in my constituency. On top of this my constituency is one of those hit hardest by the bedroom tax with 3038 affected tenants. Families are facing debt, poverty and eviction and fighting this has been my main focus as an MP since I was first elected. Too many people in Wythenshawe and Sale are turning to payday loans, expensive credit cards and doorstep lenders and this all too often lands them in a cycle of debt that is difficult to break.
In Westminster I have been supporting the work of the All Party Parliamentary Group on Debt and Personal Finance and the charity StepChange. Their campaign for a Breathing Space scheme for families in problem debt who need time and space to get back on their feet received cross-party support and I look forward to the Government putting a comprehensive Breathing Space scheme in place quickly. By providing a period free from additional interest, charges and enforcement action schemes like this can help families recover their financial situation and put in place a plan to affordably repay their debts.
Locally I have been working with Manchester Credit Union. As an ethical lender they help to make sure people get a fair deal on a loan, while also encouraging saving and keeping money in the local area.
I take the opportunity of any visits to employers in my constituency to encourage them to work with Manchester Credit Union to offer payroll deduction at source for their staff. Working with University Hospital South Manchester we have already secured this for 5,900 employees at the Hospital.
To solve the problem in the long term however we must give our children a strong financial education from the outset. That is why I have been working with local employers to get them into primary schools so our children understand about money, budgeting and managing finances.
However, with the roll out of Universal Credit (UC) looming I know the situation is about to become even more challenging. The 6 week wait risks pushing people into debt. Over half of the people the Citizens’ Advice Bureau (CAB) have helped who receive UC were forced to borrow money while waiting for their first payment. People CAB have helped with debt issues who receive Universal Credit are 14% more likely to have problems with priority debts like rent and council tax.
That is why we are calling on the Government to pause Universal Credit Full Service roll out, and work with us to deliver a more effective system, one which delivers on the original ambition of simplifying social security and making sure work always pays.
Ultimately to get on top of this debt crisis we need better access to fair credit for families who are struggling to make ends meet. We need to make our credit unions more easily accessible and we must continue to fight the usury that is payday lending.
*over-indebtedness is defined as finding keeping up with bills and commitments as a heavy burden and/or falling behind or missing payments in at least three of the previous six months