11 June 2004 - Publication of DWP research report: Characteristics of families in debt and the nature of indebtedness
Research published today by the Department for Work and Pensions examines the characteristics of households and families that are in debt and the nature of their financial difficulties. The analysis was carried out by the Personal Finance Research Centre, University of Bristol, and was based on a number of national surveys including the Families and Children Study, British Household Panel Study and the DTI Over-indebtedness survey.
The main findings are as follows:
- The average amount owed in outstanding credit more than doubled from £890 in 1995 to £2000 five years later. Lone parents had a much higher risk of being in arrears than two-parent families and were also more likely to have long-term financial difficulties. The overall incidence of arrears among families with children declined slightly between 1999 and 2002.
- Families that were in arrears were more likely to have a head of household who was young (in their twenties) and not in paid work. Families were also more likely to be in arrears if they were living as tenants rather than home owners, have an income of between £7,500 and £15,000 per annum, not have access to a current account and have three or more children.
- The average (median) owed by families in arrears (excluding overdrafts) was £300, although a quarter of families who owed the largest amounts had accumulated £740 in arrears. There was little difference in the amounts owed by lone parents and two-parent families.
- Four in ten households attributed their arrears to a loss of income, most commonly due to redundancy. Other relatively common reasons for arrears included low income and increased or unexpected expenses.
- Many of the financial problems faced by families were quite long-standing, with four in ten families who were currently facing financial difficulties saying that they had done so for more than a year. Lone parents were especially likely to have long-term financial difficulties.
- Between 1999 and 2002, the proportion of lone parents who were in arrears fell from almost a half (48 per cent) to just over a third (35 per cent). The largest reductions took place for arrears on household bills. In the same period, arrears amongst families on Income Support fell from 55 to 48 per cent, and amongst workless couples it fell from 48 to 39 per cent.
- In terms of all household types, the risk of arrears was most strongly associated with differences in housing tenure; age group; drops in income; having active credit commitments; and, whether a current account was being used to manage money. In terms of families with children, one of the key factors was lack of savings.
- Of those families in the original FACS sample in 1999, who were interviewed at each subsequent wave, almost a third (29 per cent) were not in arrears at any point during the survey. Around seven in ten (72 per cent) had encountered some arrears during that time and 16 per cent had been in arrears for all four waves. Of those always in arrears the majority (62 per cent) were lone parents.
- Moves out of employment (16+ hours a week) resulted in 37 per cent of lone parents, who had been up-to-date with commitments falling into arrears. However, moving into work of 16 or more hours a week did not improve the chances of a lone parent leaving arrears when compared with others who continued to not work.
Notes for editors
- The research was conducted by Elaine Kempson and Steve McKay of the Personal Finance Research Centre, University of Bristol and Maxine Willitts of the Social Research Division at the Department for Work and Pensions. The analysis was based on a number of national surveys, including longitudinal data sources, to identify characteristics of those in debt, trends and patterns in the levels of debt, as well as to identify key trigger points that cause people to become indebted.
- Characteristics of Families in debt and the nature of indebtedness (report series No.211) is published on 11th June 2004. A summary and copy of the report is available on the DWP website: http//www.dss.gov.uk/asd/asd5.
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