Managing the unmanageable: debt and economic resilience in Newham
This research aims to understand the links between work, low pay, benefits, credit, debt, and savings among low-income households in east London.
The researchers conducted 55 interviews with Newham residents in locations across the borough but with the majority happening in locations in Stratford, Canning Town and East Ham.
Most of the sample were finding it difficult to balance their budgets. Around two thirds of interviewees felt they were finding things difficult or were just about getting by. 18 people felt they were doing okay.
Work did provide something of a buffer, although incomes were often unpredictable due to insecure work.
Interviewees discussed how they were doing financially compared with two years earlier:
- 22 people felt their financial situation was worse
- 22 people felt their financial situation was better
- 11 felt it was about the same
The role of work had a major influence on people's situation improving or declining - as did health. Welfare reform and rising costs played a significant part for those who felt they were worse off now than two years ago.
Debt was an issue in one form or another for almost three quarters of respondents:
- 40 people out of 55 held debt of some kind. This varied widely both in the amount and type of debt held but was most commonly in the form of loans from friends and family, banks, credit unions or higher cost lenders; credit cards came next and then arrears for priority bills
- Hidden debt in the form of overdue bills for heating, light and water, and council tax and rent arrears affected over half of interviewees. This issue is increasingly important as it can lead to devastating impacts such as eviction
Interviewees were asked where they would go to borrow £50, £200 and £1000
- Most people in all cases would prefer to borrow from friends and family but the overwhelming majority said they would not consider borrowing £1000
- 24 people had received help in the form of cash or in kind from friends and family and 26 people had themselves given that support to others - both at home and also abroad
- For 8 interviewees, their debt had become so problematic that they were taken to court. At least 3 had experienced eviction from their homes and many others had moved before things got to that stage
Housing is a key factor for Newham residents. The researchers heard stories of people being on waiting lists for many years, living in temporary accommodation, moving out of the borough because of costs or losing a home. Housing is seriously problematic due to the cost of private renting, the lack of access to affordable housing, and poor quality. The majority of the sample (39) were renting.
The scale of need and hardship remains startling. Although Newham has become less deprived, according to the last Index of Multiple Deprivation in 2015, few of our respondents were living comfortably.
There have been a number of interventions in the borough since LSE last interviewed. For example Moneyworks, a Newham run money advice service and the London Community Credit Union have both opened. They play a crucial role in offering low cost credit and responsible loans but there remains a gap for those who need access to credit but have a poor credit history, have low incomes or are currently in arrears of some. However, a number of our interviewees had struggled to benefit from this help due to extreme poverty or poor credit history.
LSE's suggestion for how policy and practice can move forward are centred around four main areas:
- Financial inclusion and improving financial capabilities
- Provision of good quality and accessible debt advice
- Credit regulation
- Addressing wider inequalities
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