In 2017, one in five clients of StepChange Debt Charity had an additional vulnerability (such as illness), on top of their problem debt. New analysis from the charity now shows that they tend to be in a notably worse financial position than other clients. This underpins the importance of the financial sector’s current focus on vulnerability, and cements the charity’s view that better safety nets are needed to prevent vulnerable people from suffering disproportionate difficulty.
There are many reasons for vulnerability, according to the new analysis in Breaking the Link: a closer look at vulnerable people in debt. Among the charity’s vulnerable clients, the overwhelmingly most common reason was mental health difficulty (43%), followed by physical disability (4.7%), cancer (4.6%), and poor health (4.1%).
Debt problems are closely associated with certain forms of vulnerability, especially illness. 77% of clients with a terminal illness, and 68% of clients with cancer, cited illness as the main cause of their debt problems. Among those with mental health issues, 40% said illness was the main reason for their debt. Two in five vulnerable clients overall said that the main reason for them falling into debt was illness.
However, vulnerability can derive from situations, as well as personal characteristics – bereavement, relationship breakdown, poor treatment by firms and many other features could all make someone vulnerable at certain times, even if the vulnerability is temporary.
Vulnerable clients were significantly more likely than other clients to have a net household income of under £10,000, and significantly less likely to have a net household income over £20,000. 45% of vulnerable clients had a deficit budget (with less money coming in than going out), even after budgeting advice, compared with 30% of clients as a whole.
Over two thirds of vulnerable clients were receiving benefits, compared with half of those clients without a vulnerability. Yet their benefits were less likely to prevent them facing a budget shortfall, with 40% facing a deficit budget compared with 37% of those clients without a vulnerability in receipt of benefits.
Vulnerable clients were more likely than other clients to be in arrears on household bills such as rent, utilities, or council tax. And they spent an average of 70% of their income on essential household bills and food, compared with 65% among other clients.
Commenting on the findings, StepChange Debt Charity chief executive Phil Andrew said: “Among our clients, those who are vulnerable typically show higher levels of financial distress – but that shouldn’t be inevitable. While there has been progress, it’s clear that the finance sector, regulators and the debt advice sector could all still do more to help break the link between being vulnerable and being significantly worse off. There are questions, too, for Government. With mounting evidence that vulnerable people are not always being adequately supported in their times of need – including the DWP’s own recent survey on the impact on claimants of Universal Credit – it is only reasonable to ask whether changes to the welfare system are creating too many negative and stressful impacts on people who are least in a position to deal with them.”