Families with children are more than twice as likely to have been trapped in problem debt as childless households, research by The Children’s Society has revealed.
A survey commissioned by the charity found that one in five families with children in England and Wales (20%) have struggled with problem debt in the last year.
By comparison, the proportion of households without children who have fallen into arrears with one or more creditors is just under 8%.
The families who have been behind on their debts – a total of 1.4m – are home to 2.4m children, and The Children’s Society is deeply concerned about the damaging impact of debt on their lives.
In some cases children are going without basics such as food, clothing or heating, as well as suffering worry, anxiety and bullying.
The survey of 2,000 adults, carried out by Opinium, found that families in problem debt over the last year are juggling an average of four different types of debt. Children in low-income families with multiple debts are at far higher risk of experiencing mental health problems than those in families who owe money to a single type of creditor.
The most common source of problem debt is arrears on energy bills, followed by loans from friends and family, bank loans, and council tax.
While the size of family debt varies, overall almost one third (29%) of parents who have been in problem debt in the last year currently have arrears of more than £5,000.
While household budgets up and down the country are under strain, families with dependent children face extra pressures as they are more likely to face unexpected bills and are less able to cope with sudden financial shocks, caused by things like redundancy, reductions in working hours or illness.
The Children’s Society has found that problem debt is putting stress on family relationships, damaging children and trapping families in a downward spiral of borrowing.
As families begin to struggle financially, many feel that taking on credit is the only way to make ends meet. This often marks the beginning of a debt trap as credit repayments take up a larger proportion of income and families find themselves cutting back on essentials.
The Children’s Society’s new survey found that while debt is a problem for families in every part of England and Wales, some areas are struggling more than most. In the East Midlands, more than one third (36%) of families with children have faced problem debt, while in the South East, 13% of families with children have fallen behind with repayments.
The Children’s Society, as part of its Debt Trap campaign, is calling for changes to how creditors treat families with children who fall behind on bills and repayments. It is urging the Government to introduce a 12-month ‘breathing space’ scheme to give struggling families a period of protection from additional charges, mounting interest and enforcement action while they seek advice, put their finances in order, and get back on their feet.
Today the charity is publishing a draft of a parliamentary Bill to make this ‘breathing space’ a reality for hundreds of thousands of families. The Bill is being sponsored by Kelly Tolhurst MP and will be debated by MPs in the New Year.
Matthew Reed, Chief Executive of The Children’s Society, said: “Again and again we have raised the urgent problem of families who are trapped by debt, and whose children often pay the price with their mental and physical health.
“With unfair and unsustainable repayment plans, hidden charges, soaring interest, visits from intimidating bailiffs and the fear of eviction, the odds are stacked against parents who are desperate to find a way out of their debt. Meanwhile mums and dads are being forced to make impossible decisions between feeding and clothing their children, and paying the bills.
“It is now absolutely clear that this problem is not going away unless the Government takes action to give families the breathing space they need to get their finances back on track. Acting now could have a hugely beneficial impact, not just on family finances in the short term but on the futures of some of the country’s most vulnerable children.”
• For the purpose of this research, a family with ‘problem debt’ is one which has fallen behind on the repayments of bills or credit commitments. Families with debt, but where they are keeping up with payments, are not included.
• Findings about numbers of children and families in problem debt are based on a survey of 2,000 adults across the UK. The survey was conducted by Opinium in November 2016
• The survey found that 39% of families with children were in arrears on their energy bills, 35% on loans from friends and family, 34% on bank loans and 32% on council tax. More than one in four (26%) were in problem debt due to payday loans.
• The Children’s Society’s report, The Damage of Debt: The impact of money worries on children’s mental health and well-being, highlights how problem debt across the country is putting the mental health and well-being of children at risk, with almost a quarter of children in problem debt-ridden households feeling unhappy with their lives.
• The Children’s Society’s report, The Debt Trap: Exposing the impact of problem debt on children, showed how family debt causes children to suffer from worry and anxiety, experience bullying and miss out on essentials.
• The Children’s Society is a national charity that runs local services, helping children and young people when they are at their most vulnerable, and have nowhere left to turn. We also campaign for changes to laws affecting children and young people, to stop the mistakes of the past being repeated in the future. Our supporters around the country fund our services and join our campaigns to show children and young people they are on their side.
**A breakdown of figures by region and local authority area is available on request**