Welcome to the December 20, 2019 edition of the Fair4All Finance “Research Round-Up”. This is where we summarise some of the recently published reports and academic papers that the team has been reading. Please email hanadi@fair4allfinance.org.uk with any reports or papers that you want us to consider for the next one!

RECENTLY PUBLISHED REPORTS

Information is Power: Preventing Financial Difficulties Associated with Mental Health Problems

Nikki Bond and Tasneem Clarke, Money and Mental Health Policy Institute, December 2019

People struggling with their mental health are at a significantly higher risk of financial difficulty, which in turn can exacerbate mental health problems and prolong mental health recovery. This report explores opportunities to break this cycle by preventing financial difficulties (i.e. problem debt) associated with mental health. Investigators surveyed people within the Money and Mental Health Research Community that either have lived experience of mental health problems (473 people), that have cared for someone with a mental health problem (62 people), or that are a professional working in mental health services (158 people). In addition, they held two online focus groups (8 people). Researchers find that early help with managing money would better support recovery for those struggling with their mental health and would reduce the demand on mental health services (64 per cent of participants feel this should happen at diagnosis). Treatment guidelines from the National Institute for Health and Care Excellence echo that service users should be provided with information “pertinent to their diagnosis”, which can include information on potential financial risks and their psychological consequences.

In practice, however, researchers note that the barriers to a preventative approach to financial difficulty mean that services tend to be reactive, which can be insufficient in reaching everyone who is experiencing financial problems as a result of mental health. These barriers include a lack of time; a lack of skills, knowledge, and support resources; and the need to develop a trusting relationship. Therefore, examiners recommend a public health approach to this problem, which seeks to proactively reach out to people utilising regular contact points with everyday organisations, services, and people. Preventative support addresses two main problems: (1) lack of income and (2) difficulties managing money and spending. This approach can be categorised as one of three types of support: (1) information; (2) emotional support; and (3) practical support. Read the full report >>

Let’s Talk About Money: How Third-Party Money Alerts from Toucan Affected People Living with Mental Health Conditions

Toucan, December 2019

Toucan is an app that helps people manage their money better together with someone they trust, typically a carer. They are finalist for the Nesta’s Open Up Challenge 2020, which means they have been awarded £100k.

The briefing analyses the financial resilience gap—i.e. what situations trigger people’s spiral of financial difficulties and why so many people fall into problem debt as a result. In 2018, seven in every ten StepChange clients stated that the primary reason they fell into problem debt was because of a life event or shock. In addition, the research finds that people with higher incomes are more likely to rely on credit to cope with these shocks, and only 15 per cent applied for state benefits following the event. This concludes that unexpected life events trigger most debt problems, however, only a minority of people use state support to cope. Next steps are to understand more about people’s experiences and the role for universal services to prevent problem debt. Read the full report >>

The Liquidity Trap: Financial Experience and Inclusion in the Liquid Workforce 

Demos, December 2019

The liquid workforce makes up an increasingly significant proportion of the UK labour market. In the first quarter of 2019 alone, the number of self-employed workers increased by 90,000 to reach a record high of 4.93 million in March 2019, according to ONS statistics (includes independent contractors and people working in the ‘gig economy’).

This report aims to improve our understanding of the financial lives of the liquid workforce. Although many liquid workers highly value the flexibility that this type of employment offers, previous evidence suggests that financial insecurity can be a considerable problem for this group. Liquid workers also face significant financial exclusion, hampering their ability to effectively manage their finances. Examiners at Demos conducted two focus groups, each with ten liquid workers in Sheffield and London. In addition, researchers complemented their qualitative research with a survey to understand how the financial lives of the liquid workforce differ to those of employees. They find that liquid workers were generally less likely to use financial products than employees. This is, in part, explained by the fact that liquid workers have a higher likelihood of being turned down for financial product services (39 per cent of liquid workers have been turned down in the last five years, compared to 31 per cent of employees and 23 per cent of the general population). The survey additionally finds that workers are often denied credit for different reasons than employees, as 33 per cent of employees are turned down due to bad credit (as opposed to 24 per cent of liquid workers), and liquid workers are twice as likely to be turned down for their employment history and for having an insufficient credit record (20 per cent, as opposed to 13 per cent).

Researchers additionally find that liquid workers are more likely to earn very low incomes than non-liquid workers, with 22 per cent of liquid workers earning under £10,000 per year (compared to 7 per cent of employees). Demos provides recommendations to address these problems (pp. 32-37), including ways to boost pension take-up and increase access to financial products.  Read the full report >>

Wales in the Red 

Josie Warner, StepChange Debt Charity, November 2019

This report summarises the debt situation of StepChange clients in Wales. It illustrates a range of issues including key trends in debt types, financial situations, and household bills of individuals. First, researchers find that the top three reasons for debt among clients in Wales are: (1) reduced income (16 per cent), (2) injury or illness (15 per cent), and (3) unemployment (12 per cent). These are the same top three reasons for all clients across the UK. In addition, examiners find that 45 per cent of adults in Wales disclose that they, or someone in their household, have experienced a “life event” (e.g. separation, unemployment, etc.) in the past two years, and 28 per cent have experienced a life event that made them worse off financially in the same time period. Additional information outlined by report includes:

• 50 per cent of clients are in full-time or part-time employment, while one in three are unemployed;
• 39 per cent of clients are in a negative budget;
• There is a high proportion of single parents, which can be attributed, in part, to the large number of female callers;
• There has been a significant increase in new clients who are renting their homes;
• More than 42 per cent of clients have an additional vulnerability;
• Over half of Welsh clients are aged under 40 (yet only a third of all Welsh adults in the wider population fall into this age group);
• The average total unsecured debt owed is £10,415 (10 per cent have a payday loan and 11 per cent with home credit);
• The proportion of clients in Wales with a payday short-term loan, high cost credit debt has fallen substantially over the past five years;
• There has been an increase in the proportion of clients with council tax, energy, and wealth arrears since 2014

Read the full report >>

PUBLISHED ACADEMIC PAPERS

Debtfarism and the Violence of Financial inclusion: The Case of the Payday Lending Industry.

Jesse Hembruff and Susanne Soederberg 

Forum for Social Economics, 46(1), 1-20, January 2019

The paper explores the role of government in legitimating and facilitating the expansion of expensive forms of credit to low-income households. Researchers argue that payday lending is more than a construct that primarily benefits private creditors at the expense of the working poor, and instead that the working poor have been made to rely on these expensive loans to meet basic needs. They state that government attempts to deal with payday lenders acts as a temporary solution for two reason: (1) they do not address the structural issues surrounding the necessity of the working poor to turn to commercial lenders to meet basic subsistence needs, and (2) government interventions are marred with built-in loopholes that allow the payday lenders to expand under the guise of “online lending, superficial status changes, and next generation lending technologies to assist the growth of the payday lending industry”. Read the full paper (£) >>