INSIGHTS ¦ Pushed Under Pushed Out


Summary

The report from Christians Against Poverty (CAP) and the Centre for Research in Social Policy (CRSP) at Loughborough University delves into the interrelationship between debt, poverty, and living standards in the UK. Utilising the Minimum Income Standard (MIS) for its benchmark, it provides insights into how different levels and types of debt affect individuals’ risk of falling below MIS, thereby exacerbating poverty and impeding access to a decent standard of living. The study highlights the nuanced impact of debt on various demographics, including lone parents and those experiencing ill-health, while also examining the role of life events in influencing debt vulnerability.

Key Points

  1. One in five people in the UK lives in poverty, with debt playing a significant role in lowering living standards.
  2. The MIS is used to measure the income needed for an acceptable standard of living, emphasizing participation in society beyond mere survival.
  3. Higher debt-to-income ratios are associated with an increased perception of debt as a burden.
  4. Debt repayments, especially for households with children, significantly push individuals below the MIS threshold.
  5. Employment does not necessarily shield individuals from the negative impacts of debt and low income.
  6. Different types of debt, particularly bill arrears, increase the risk of falling below MIS, while access to credit cards can help households stay above MIS.
  7. Life events, such as illness or relationship breakdown, exacerbate the risk of falling into poverty and experiencing burdensome debt.
  8. The study suggests a review of social security and wages against MIS and calls for more informed anti-poverty strategies.
  9. There is a need for proportional debt repayments and improved employment conditions to prevent debt from pushing households below MIS.
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Key Statistics

  • 20% of UK residents live in poverty.
  • Debt repayments for households with children are most likely to fall below MIS.
  • Lone parents and those with disabilities are particularly vulnerable to falling below MIS due to debt.
  • A debt-to-income ratio increase is linked to a higher risk of falling below MIS, with a ‘tipping point’ making the risk more pronounced.
  • Employed individuals lacking disposable income are significantly impacted by debt repayments, deepening their financial distress.

Key Take Aways

  • Debt and poverty are interlinked, significantly impacting living standards.
  • Access to credit, particularly credit cards, can serve as an income smoother, helping some households stay above MIS.
  • Bill arrears are identified as the most burdensome type of debt, pushing people below MIS.
  • Lone parents face a higher risk of falling below MIS due to lower debt repayments compared to other household types.
  • Life events significantly affect individuals’ financial stability and risk of falling below MIS.
  • Policy recommendations focus on reviewing social security and wages against MIS, implementing informed anti-poverty strategies, ensuring proportional debt repayments, and improving employment conditions to meet MIS.
  • The depth of inadequate living standards increases with the persistence of being below MIS, highlighting the need for long-term solutions to debt and poverty.
  • The study underscores the necessity for systemic changes in social security, wage policies, and debt management to uplift households above the poverty line and ensure a decent standard of living for all.

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