• On average, working age people living in higher income households are less likely to experience problem debt or to feel that their debt is a heavy burden compared to those in lower income households. 
  • 13% of working age people in the bottom tenth of income (the poorest 10%) are living in a household with problem debt, compared to just 0.7% of those living in a household in the top tenth of income (the richest 10%).  
  • A fifth (21%) of working age people in the bottom tenth of income are living in a household where at least one adult considers their debt a heavy burden. This drops to just 1% of those in the top tenth of income. 

This chart shows the proportion of people living in a household with problem debt and the proportion who are living in a household where at least one adult feels their debt is a heavy burden, for each income decile in 2016–18. Individuals are grouped into 10 equal-sized bands (deciles) based on their equivalised income (adjusted for household size) after housing costs.  

An individual is in problem debt if they live in a household which has liquidity problems (those struggling to pay their bills now), solvency problems (those who are at risk of future problems due to their current levels of debt) or both. The problem debt measure uses a combination of subjective and objective factors of over-indebtedness. An individual is living in a household that considers their debt a heavy burden if they are living in a household where at least one adult considers their debt a heavy burden. This is a purely subjective measure. 

Being in problem debt can harm people’s physical and mental health by acting as a source of strain and stress, reducing income available for health-promoting goods and services or increasing health-harming behaviours such as problem smoking. Poor health can also increase the possibility of problem debt, for example through employment loss or low income. This can create a cycle of problem debt and poor health. 

  • Working age people in lower tenths of income are more likely to be in a household experiencing debt problems or be at risk of experiencing debt problems in the future than those in higher tenths of income. 
  • In the lowest tenth of income, 13% are living in a household experiencing problem debt while in the top tenth of income, under 1% are living in a household experiencing problem debt. 
  • For those in the poorest 10% of households, 21% are living in a household that considers their debt a heavy burden while in the next tenth of income this drops to 14%. For those in households in the top tenth of income, just 1% are living in a household that considers their debt a heavy burden. 
  • The proportion of respondents who live in a household experiencing problem debt or who consider their debt a heavy burden falls between each income decile from poorest to richest, except between the fourth and fifth tenths of income where there is a slight increase. 

Our analysis shows that people in the lowest fifth of income are less likely to hold debt – around 45% do, compared to over 60% of those in the second highest fifth of income. But those who do are more likely to spend a higher proportion of their income on debt repayments. Among those with debt in the lowest fifth of income, 18% spend more than 20% of their income on repayments, and nearly one in ten (9%) spend over 40%. For the top fifth of income, the equivalent figures are 9% and 3%.  

 

Working age people in lower tenths of income are more likely to experience problem debt or to feel that their debt is a heavy financial burden. A better specified and permanent version of the government’s £500m social fund could help reduce those seeking inappropriate debt products to deal with their expenditures. 

  • A household is defined as being in problem debt if it falls into one of the following two groups:  
  1. Liquidity problems:  
    1. household debt repayments represent at least 25% of net monthly income and at least one adult in the household reports falling behind with bills or credit commitments, or 
    2. household is currently in two or more consecutive months’ arrears on bills or credit commitments and at least one adult in the household reports falling behind with bills or credit commitments. 
  2. Solvency problems:  
    1. household debt represents at least 20% of net annual income and at least one adult considers their debt a heavy burden.  
  • This analysis uses financial debt, which is the money owed on credit cards, loans and other non-mortgage debt but excludes property debt and council tax. 
  • Individuals were asked: ‘Thinking about the [overdraft(s)/credit card(s)/store card(s)/ credit agreement(s)/loan(s)/bill payments] you have just told me about, to what extent is keeping up with the repayment of them and any interest payments a financial burden to you?’ This analysis looks at the proportion of all respondents who live in a household that finds debt repayments a ‘heavy burden’. Other options include ‘somewhat of a burden’ and ‘not a problem at all’. It is taken from part 2 a) of the household problem debt calculation above. 
  • The income deciles are based on net equivalised household income (adjusted for household size) after housing costs have been deducted from income. Individuals are grouped into 10 equal sized bands (deciles). The first decile represents the lowest 10% of incomes and the tenth decile represents the highest 10% of incomes.  

Source: Health Foundation analysis of ONS, Wealth and Assets Survey Round 6

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Debt and health

20 January 2022

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