How government policy is forcing poor people into catastrophic debt.

Abi Wilkinson Abi Wilkinson.

The benefit cap, zero-hours contracts, and now universal credit have all exacerbated the debt burden on people already struggling to eat and pay rent
Tue 16 Jan 2018 13.10 GMT

It is extraordinarily expensive to be poor.

The less money you have, the more expensive many things are likely to cost.

Those with the lowest incomes are often forced to access electricity and gas via prepaid meters – forking out hundreds of pounds more annually than those who pay by direct debit.

And when your income is only just enough to cover your basic living costs, even modest unexpected outgoings can push you into debt.

New school shoes, perhaps.

Or a train ticket to visit a hospitalised elderly parent. The situation is even scarier with larger buys.

What are you supposed to do if you live in a rural area and your car breaks down – borrow the money to fix it, or risk losing your job because the patchy local bus service won’t get you in on time?


Quarter of UK’s poorest households are getting deeper in debt, IFS warns
Read more
Not all debt is the same, of course. The more affluent you are, the more likely it is you’ll be able to access credit at low interest rates. Doorstop lenders and extortionate BrightHouse-style rent-to-own companies target poorer customers because they are the least likely to have other options.A £600 computer can cost £2,000. But now the rent-to-own retailer has to repay £14.8m to customers

Eye-watering annual percentage rates mean debts can quickly spiral out of control. Even initially enticing 0% credit cards can catch you out if you fail to keep up with minimum payments. And if you’re barely bringing in enough to cover rent, food and bills, finding that regular extra income can be a struggle.

Borrowing & debt

Universal credit
Councils forced to fund emergency help for universal credit claimants

Quarter of UK’s poorest households are getting deeper in debt, IFS warns
Poorest households are spending 25% of monthly income servicing debts as UK borrowing rockets

Labour says its findings offer more evidence that the government should pause rollout of new benefit system.

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