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CSJ - Household debt grows for 26th consecutive month, reaching £1.47 trillion

Radical Centre for Social Justice blueprint would create new lending system for low-income groups at risk of bad debt.

Household debt has soared by more than £34 billion in less than three years, exceeding UK national debt in all but three months.

Unsecured debt on credit cards, overdrafts and payday loans increased by £10 billion to more than £170 billion – the highest level in four years.

15 million people borrowing in order to cover their bills.

A major new report by the Centre for Social Justice (CSJ) warns that 8.8 million people are now over-indebted due to more than two years of increasing household debt.

Low-income households face the biggest challenges from Britain’s mounting personal debt, as they often have little choice but to take on high-cost short-term credit.

The report says that a radical new vision and approach to tackling debt for the poorest households is needed.

The groundbreaking research, commissioned by the JPMorgan Chase Foundation, says low income consumers and those struggling with problem debt should have financial services and products designed around their wants and needs – not in a way which robs people of personal responsibility.

Christian Guy, Director of the Centre for Social Justice, said: “For more than a decade the CSJ has documented how problem debt is a cause of poverty, as well as a consequence. It damages families, affects mental health and makes it extremely difficult for people to get back on their feet.

“The Coalition Government achieved important progress but this report shows the time has come for a radical shake up of the lending market. We need to create a new generation of responsible lenders to offer people an alternative to the dangerous debt spiral many get stuck in. Credit Unions only take us so far.

“This revolution in tackling problem debt should form an important part of the new Government’s ‘One Nation’ plan. But our report is also a rallying call to the private sector who could be doing so much more to help a group currently forced into the arms of dodgy lenders.”

The CSJ’s new report says that people from low-income households, often have to rely on banking services designed for people with larger or more regular income which can leave them worse off.

Low-income households often find it difficult to manage direct debits for example, which can lead to them becoming overdrawn and hit by heavy fines.

Drawing on extensive examples from the US and the UK, the CSJ report showcases a number of social enterprises, including Fair Finance and Moneyline, which offer a range of services to help people bridge income gaps, build savings, improve their financial skills and get safe advice about their debts.

These Alternative Financial Institutions (AFIs) provide a blueprint for the models that need to be encouraged and expanded to tackle problem debt. T

he report, Future Finance: A new approach to financial capability, shows how the new Government could lead in developing AFIs, both by promoting a specialised body to facilitate social investment in innovative AFIs and launching a new accelerator programme to help them achieve scale through the use of financial technology (FinTech) solutions.

The report makes a series of recommendations to build this new market for socially responsible financial services, including:  Introducing new forms of accreditation so that investors can more easily identify promising AFIs; 

A new body to assess the business models of AFIs and connect them with social and commercial investors, using funding from Big Society Capital, Corporate CSR programmes and charitable organisations, to provide a guarantee for investors; 

The Government establishing a social financial technology accelerator programme (SoFiTech) in partnership with the FCA. This programme would nurture young tech start ups and provide seed funding as well as mentorship to help grow the business. Hang Ho, Head of JPMorgan Chase Foundation for EMEA said: “There is an urgent need to better understand the inter-related and multi-faceted reasons for over-indebtedness amongst low-income and vulnerable people in order for public, private and voluntary organisations in the financial capability space to tackle this growing issue more effectively and at scale going forward.”

For media inquiries, please contact: -  Lucy Kinder, CSJ on 07780707322 or - Beatrice Timpson, Media Intelligence Partners Ltd on 07803 726977 or

View report:

The Centre for Social Justice (CSJ) is an independent think tank established in 2004 to put social justice at the heart of British politics.

In June 2013, the CSJ was awarded UK Social Policy Think Tank of the Year at Prospect magazine’s Think Tank Awards.

Last year the CSJ published Breakthrough Britain 2015, which set out almost 200 evidence-based policy recommendations to tackle poverty in the UK. This included solutions to worklessness, educational failure, addiction, family breakdown and problem debt.

The CSJ has published dozens of seminal papers which have shaped government policies, including Dynamic Benefits, which has led the Coalition’ welfare reforms. Further to this, the CSJ manages an Alliance of over 300 of the most effective grass roots, poverty-fighting organisations.

The CSJ is able to draw upon the expertise and experience of Alliance charities for research work and media inquiries. Journalists wishing to conduct grass-roots research into social problems can be put in touch with front-line charity directors and staff.

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