Debt, harm and £5billion missing from the statistics

Official debt figures do not take into account an estimated £5billion of rent arrears, unpaid council tax and outstanding gas and electricity bills, according to a report from the thinktank Demos.  They described it as a“black hole” of hidden debt.

Researchers also created a “harm index”, which established which debts cause the most financial, emotional and social consequences.

On this scale, mortgages caused a relatively low level of distress, despite being  most people’s largest debt.  By contrast, after illegal loans (which affected a very small number of people in the research) payday loans registered the most overall harm, followed by council tax, utility bills and doorstep lending.

The report has made four principal recommendations.

It wants the official measure of debt to be changed, to include not just consumer credit, but also arrears on housing and utilities.

It says that steps need to be taken to mitigate the impact of some forms of debt, including giving borrowers a legal right to negotiate directly with their creditors.

Public awareness campaigns for the Money Advice Service and financial capability should specifically target the stigma associated with being in debt and seeking help for debt advice.

And Demos says that debt advice organisations should all draw on the good practice found in their sector and adopt a personalised approach in the advice they offer clients.

For more on this story, click here.

To read the full report, click here.