Dangers of Debt: Why Labour Must Policy Focus on Tackling the Debt Crisis

By Cllr Seema Chandwani

Over recent years we have seen the emergence of a highly patronising policy to address debt with ‘financial resilience’ and ‘financial literacy’, as if those who find themselves in debt are somehow weak or stupid. Most people I know on low incomes never cease to amaze me at how they keep their families going and the creativity they use to survive.

People are facing this debt due to the mishandling of the economy and not because they are financially illiterate or lack resilience. 

The cocktail of wage stagnation, the rising cost of living, the over-inflated housing market and a weak social security system leaves people vulnerable to debt. Once debt kicks in, it is like quicksand and it plunges people into a dark place, from poor credit and court action to bailiffs and evictions. It speeds the journey to destitution.

Culturally we have a strange obsession of criminalising and punishing low-income people for being unable to survive poverty. Debt is seen as something people should have avoided and is a choice rather than the consequence of poor economic management by the government.

We are led to be believe that debt is accrued from over-consumption of high value luxury goods. However, the data is clear that most of the debt we see is routine ‘cost-of-living’ debt. Only last week Citizen Advice Bureaux reported that over 3.5 million people in the UK are now in Council Tax Debt. The Joseph Rowntree Foundation claim 2.5 million people are at risk of rent arrears with 350,000 already facing a real threat of eviction.

The unfortunate characteristic of cost-of-living debt is it is continuous: every month it grows. And the consequences are severe: people can be evicted or face court action with additional costs attached. We are not asking people to cut their overseas holidays from three times a year to twice a year to avoid debt: the choices people are making is to skip meals and not heat their homes to minimise their outgoings.

Tonight, in Haringey I will be going to Cabinet with our Tackling Debt Strategy, looking at our unique role as both a support-giver and a creditor where residents pay us council tax and in some cases housing rent. It places councils in an odd place, some might say contradictory. In the short time I have been the Cabinet Member, I have found it hard to reconcile that I am responsible for parts of the council which chase low-income and often vulnerable residents for payment, using enforcement – yet simultaneously we are housing street homeless people in hotels.

The Tackling Debt Strategy aims to address that contradiction and bring in a consistent ‘whole council’ approach to working with low-income residents. It looks at our macro-approach in engineering change for our residents through house building council homes at council rents to tackle the housing market in the absence of rent controls, and thus to reshape our economy through community wealth-building, increasing our spend locally to stimulate and sustain business and jobs. It also looks at our micro-operations of providing support, ceasing the use of bailiffs to chase down debt from those who can’t afford to pay, and having a clear pre-action protocol which enables us to triage residents in debt to us and target support.

It places power in the hands of our support-giving arm of the council, where social workers and other frontline professionals working with people in need have a key stake in how we proceed with a low-income vulnerable resident in debt to us collectively.

It moves our revenues and collections team from being a process-orientated service to a key strategic driver of change, both at an individual level for people in debt and at a borough level, allowing us to understand the trends and demographics to target our resources to.

Of course, there are key parts of this work which is trying to mitigate the damage to our communities from poor Tory policies which will see our country under-prepared for the post-COVID recession about to be unleashed. The ultimate solution is solid Government policies which see the return of things like Council Tax benefits, the Social Fund and restoring Revenue Support Grant levels for local authorities.

But if we do not act, if we do not transform how we work, if we do not prevent and support the growing numbers of our residents encountering debt, if we continue to pursue vulnerable people in debt to us, then the cost of managing the fall-out is too great for both our communities and our depleting local government budgets.

Cllr Seema Chandwani is the Cabinet Member for Transformation and Public Realm Investment for Haringey Council.

Image: debt. License: Creative Commons 3 – CC BY-SA 3.0 . Attribution: Alpha Stock Images – http://alphastockimages.com/ Original Author: Nick Youngson – link to – http://www.nyphotographic.com/ Original Image: https://www.picpedia.org/highway-signs/d/debt.htmlImage: Debt.

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