There is almost no social issue that is not in some way related to financial difficulties. When I was working as a journalist, I would regularly ask local policy-makers or social workers about various issues, but conversations always came back to their constituents’ and clients’ finances. Initially, this baffled me. I was trying to talk about health policy, and they were telling me about rent arrears. Widespread financial fragility, they said, made their work incredibly difficult. It could befall anyone. From the newly-divorced parent eager to stay in a slightly-too-expensive apartment for the sake of the children, to the self-employed creative surprised by an unexpected tax bill.
Across Europe, financial fragility is endemic. Eurostat data suggest that 38 per cent of the UK population is unable to meet a single unexpected expense. This is not confined to people with lower incomes. The same dataset shows that in the third quintile – the middle of the middle class – 14 per cent of Britons cannot spend a small amount of money on themselves each month. Many families are one broken washing machine away from financial disaster.
High levels of financial fragility combined with easily available credit and complicated welfare systems lead many citizens into a downward spiral of debt. This is not unique to the UK; all over the world, societies are struggling with this issue. One of the most striking examples I came across as a journalist was a man named Michael, from the Netherlands. Despite his steady, well-paying job, he was struggling to get by because of debt repayments. His payment plan ate up most of his salary. He and his family were counting every penny.
Then, one day, Michael’s wife woke up with acute back pain. As he drove her to the hospital, they were stopped by a police officer. Michael was not wearing a seatbelt. The police officer wrote them a fine. “I can’t pay that,” said Michael. “You will have to”, the police officer said. As the debt went unpaid, Michael was eventually sent to prison – over a 120 euro traffic ticket.
Once people are in debt, it can be very difficult to get out. For instance, when people do agree to a payment plan with their creditors, they tend to commit to overly ambitious monthly payments, leaving themselves no budget space for unanticipated expenses. And so, in paying off one debt, they are often forced to create another. The creditors don’t mind – understandably, they are just happy to get their money back – but the dynamic is costly to society.
In the most extreme cases, incarceration is supposed to be wielded as a threat only against those who are able to, but choose not to pay. But the means assessments that are supposed to separate the can’ts from the won’ts are often inaccurate. Only two months ago a High Court judge ruled that up to a fifth of the imprisonments for unpaid council taxes in England and Wales were unlawful. Moreover, it is an incredibly expensive method of making people pay.
Any policy response to financial fragility and debt must deal with complicated moral questions. As anthropologist David Graeber points out in his book Debt, our moral and religious language is often based on ancient metaphors of debt and indebtedness. In many languages, “guilt” and “debt” are even the same word. That etymology underscores how deeply intertwined debt and morality are for us. Of course, we say, people have to take responsibility for their own (financial) choices – we all do. But such an approach becomes difficult when half the country is struggling to get by.
So we have to devise a better, more efficient approach. We could do more to prevent debts before they arise, or work to facilitate more fruitful negotiations between debtors and their creditors.
And it is not all doom and gloom. Because so many countries are struggling with the same issues, there are also many good ideas out there, many of which have been proven to work in practice. Some are minor tweaks, making means assessments more accurate for instance, while others would be more drastic. In Sweden for instance, debt collectors are part of a government agency. Debt collection is integrated with services to help people get back on their feet. Meanwhile in the Netherlands, some municipalities are experimenting with early warning systems, allowing social workers to intervene before problems spiral out of control.
Having researched and reported on this issue for the past few years, I am cautiously optimistic. Policy-makers are eager to tackle these problems and many organisations, both governmental and non-governmental, are showing that another approach is not only possible, but cost-effective. Therefore, we should resist the urge to be parochial about the topic. A comparative, scientific approach building on best practice is the way forward.
Michael, the man who was imprisoned over a traffic fine, is doing well these days. Thanks to help from a debt charity, he was able to renegotiate and finally pay off his debt. “It is the most remarkable, beautiful thing,” he said, “to be able to use your mind for things other than money worries”.