Strategy and Policy Team, Strategy, Localism and Communications, Cornwall Council.

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2 Understanding debt in Cornwall February 2014 This report pulls together relevant data for Cornwall and considers debt alongside other related evidence such as cost of living, overall poor wages and economic environment. Key messages The main challenges for Cornwall, the Council and partners are: Cornwall has a significant and growing debt problem. Personal insolvency rates in Cornwall continue to be higher than the south west and national averages however the gap between Cornwall and the rest of the country is decreasing. Problem debt is anticipated to worsen in the future. The wider economic and policy context strongly suggests that we will see increased financial stress and indebtedness in Cornwall over coming years. People living in rural areas can face additional barriers that increase their risk of getting into problem debt. A lack of access to a car, poor public transport or long travel times can be a barrier for people seeking to access work, training or advice and guidance, increase their incomes, access childcare, cheap fuel or food. Some areas are worse affected than others. County Court Judgements, financial stress indicators and council tax arrears reveal very similar geographical concentrations with hot spots in town areas, a cluster around Camborne and Redruth and a clear concentration in the Clay Country as part of a wider area stretching from Newquay to Liskeard and Saltash. The cost of living in Cornwall is high relative to the rest of country and is rising. For the poorest households, rising costs in living may mean these people face extremely difficult choices in terms of what they can afford to spend their limited money on for example heating, eating. 2

3 Contents Key Messages 2 Contents 3 Emerging impacts of welfare reform 4 Introduction 4 Personal Debt and problem debt 4 What is problem debt? 5 Who are in debt? 6 Debt in rural areas 7 Cost of living 7 Insolvency 9-12 Landlord and Mortgage statistics County Court Judgements 16 Financial stress Council tax arrears 19 Citizens Advice Bureau 20 Looking to the future 21 Conclusions and implications 21 Appendix 22 Bibliography 23 Notes and definitions

4 Emerging impacts of welfare reform Cornwall Council is monitoring the impact of welfare reforms. Early findings include: An increase in rent arrears for those affected by the bedroom tax An increase in applications for Discretionary Housing Payments An increase in the use of food banks A reduction in the Council tax collection rate These indicators paint a picture of households experiencing financial stress, having to make difficult choices about how they spend their money and which expenses to prioritise. Cornwall Council will continue to monitor the impact of the Welfare reforms and will work with partners to better understand the impact across Cornwall. Introduction Millions of people in the UK are currently struggling under the weight of their personal debt. Squeezed household budgets, the rising cost of living and a stagnant economy have pushed many people to the edge of or over a financial cliff. The impact of this debt can extend far beyond the monetary consequences, affecting people s heath, family stability and employment prospects. In the 2007 report, Breakthrough Britain, the Centre for Social Justice identified some of the root social and economic causes of serious personal debt, including issues of materialism, exploitative lending and poor financial skills. It also examined how high levels of personal debt were especially prevalent in Britain s poorest communities who were suffering as a result and often left trapped in poverty. This situation has not improved. This report pulls together relevant data for Cornwall and highlights a real case for concern, when debt is considered alongside other relevant evidence such as cost of living, overall poor wages and economic environment. Personal debt and problem debt Personal debt can be broadly categorised into three types: Mortgage debt Consumer debt (such as credit card debt, overdrafts, personal loans, payday loans etc) Cost of living debts (utility bills, rent arrears, council tax) The rapid growth of mortgages over the past two decades has contributed the largest total amount to Britain s personal debt. However it is not as concerning as the rise in consumer debt over that same period. Unlike mortgage debts, which are tied to the value of a house, unsecured consumer borrowing is at higher interest rates and is more likely to spiral out of control, driving people into problem debt. 4

5 People in the UK now owe 1.43 trillion including mortgage lending, an average of 54,000 per household, up from 29,000 a decade ago. 1 Consumer debt has trebled since 1993, reaching 158 billion in More than 8 million households now have no savings at all, affecting around 50 per cent of low-income households. 3 An estimated 5.3 million households would benefit from debt advice but only 2.6 million people sought some form of debt advice in Outstanding personal debt nationally stood at 1.43 trillion in 2013, which equates to individuals owing nearly as much as the entire country produced during the whole of Scaled for Cornwall this would amount to 14 billion, almost twice Cornwall s annual economic output figure (GVA) 6. Low wages coupled with rises in utility bills and rents have gradually eroded household savings and slowly pushed many people into problem debt. Households are increasingly turning to alternative high-cost credit as a way to make ends meet, due in part to the decrease in mainstream lending offered by banks, which can drive those on low incomes deeper into debt. What is problem debt? Problem debt: Debt that is of concern not due to its absolute value in monetary terms, but because of its size relative to the holder s disposable income, their inability to repay it, and because of the impact, not just in financial terms but also on their health, relationships and wellbeing. The most common causes of over-indebtedness are an unforeseen change in circumstances such as illness, divorce or unrealistic repayment expectations. The Citizens Advice Bureau also mentioned how changes in government legislation can be a contributory factor. 7 Managing problem debt effectively can have direct financial benefits for local authorities in decreased defaults on rent and council tax payments from residents, and reduced demands on other services such as health, housing and social services. Helping people to manage their money better is not just an issue for the here and now. The costs of financial exclusion are intimately linked with prolonged and entrenched worklessness, and other patterns of ill health, illiteracy and social deprivation that are found in our poorest communities. The most common debt problems concern credit card debt and unsecured personal loans 8. When people get into serious trouble with debt, it can escalate and result in court action. This could be in the form of; 1 The Money Charity, Debt Statistics October 2013, London, The Money Charity, 2013 & Bank of England, Table: LPQBZ2A & ONS, Population and Household Estimates for the United Kingdom, Calculation based on average outstanding debt in the four quarter of 2001 divided by number of households (24.5 million) in Bank of England, LPQBI2O: Quarterly amounts outstanding of total (excluding the Student Loans Company) sterling 3 DWP, Family Resource Survey 2011/2012, DWP, 2013, Table Money Advice Trust, Demand capacity and need for debt advice in the United Kingdom Credit Action debt statistics 6 Internal estimate based on Cornwall having 1% of national population. 7 In too Deep, CAB The Value of Debt Advice, CAB. 5

6 Bankruptcy, insolvency or an Individual Voluntary Arrangement (IVA) to manage the debt Mortgage or landlord repossession County Court Judgement (CCJ) where a person owes money and the creditor makes a court order against them This only captures cases which have gone to court and so this report explores additional information to develop a more complete picture. This includes; Experian financial stress using a range of indicators to map high levels of financial stress Council tax arrears Looking to the future Who are in debt? The term financial exclusion in its broad sense refers to people who have constrained access to mainstream financial services. 9 According to the Joseph Rowntree Foundation those particularly vulnerable to financial exclusion include: housing association tenants young people not in employment, education or training people leaving care lone parents divorced people disabled people those with mental health problems carers people living in isolated or disadvantaged areas prisoners, ex-offenders and families of prisoners members of ethnic minorities migrants, asylum seekers and refugees homeless people older people women people with a Post Office Card Account or basic bank account people with low incomes Financial Services Provision and Prevention of Financial Exclusion, European Commission, Joseph Rowntree Foundation,

7 Debt in rural areas According to the Commission for Rural Communities Cornwall is identified as mostly rural, as 50% of its population live in rural settlements or market towns. 11 A report from the Commission found that: 12 Like poverty, financial exclusion is less visible in rural areas compared to urban areas. This makes it harder for service providers to identify and therefore target support to the people who most need it. Poor public transport systems and long travel times make physical access to mainstream financial services difficult and more costly for people living in rural communities. Higher service costs in rural areas, due to a widely dispersed client base and poor economies of scale, is a challenge when delivering debt advice and credit union outreach services. The Citizens Advice Bureau (CAB) have seen an increase of debt inquiries in rural areas, more so than anywhere else. Cornwall has been identified as a successful example of how effective partnership working can improve financial inclusion as highlighted in the Rural Money Matters report by the Commission for Rural Communities 13 Rising inflation, stagnant wages, unaffordable housing costs and expensive fuel are just some of the forces tightening spending power and leading to ever-increasing pressure on household budgets. Cost of living Recent analysis completed by the Community Intelligence Team highlights some indicators of the cost of living in Cornwall and compares costs with regional or national levels. There are a number of higher costs for the average household in Cornwall compared to the national average or to other parts of the UK these include water and sewerage charges, costs of energy and transport fuels, and mortgages. Housing costs are generally in line with, or below, the national average, such as council tax and the rental of local authority or social housing. Costs of living in Cornwall are set in the context of lower than average annual earnings and higher than average house prices. The living wage (pay needed to provide an adequate standard of living) is 7.45 per hour it is estimated that around 20% of the working age population earn less than the living wage in Cornwall. On average people in the South West spend more a week on transport, recreation and culture, food and non-alcoholic drinks, but lower than average for clothing, footwear, restaurants and hotels. A high proportion of households in Cornwall are in fuel poverty an estimated one in five households in Despite good work to tackle fuel poverty in 11 Indicators of Poverty and Social Exclusion in Rural England: State of the countryside update: Financial inclusion 13 Rural Money matters: A support guide to rural financial inclusion - August

8 Cornwall, we face challenges due to limited availability of mains gas, low incomes and the high numbers of property types that are hard to heat, e.g. park homes and Cornish units. People in Cornwall are generally more reliant on cars, especially in rural areas. Rising costs of personal transport (specifically fuel costs) and limited access to public transport are likely to be particularly significant to household budgets. On average, the costs of transport is the largest area of household expenditure. Over the decade to 2010, the level of income which is needed to enable a minimum acceptable standard of living is estimated to have increased by 38%. This is attributed to rises in the cost of things like food, council tax and public transport. For the poorest households, rising costs in living may mean these people face extremely difficult choices in terms of what they can afford to spend their limited money on for example heating or eating. 8

9 Insolvency Each year more than 130,000 people declare bankruptcy or some other form of insolvency. 14 Although rates of all new personal insolvencies in Cornwall increased substantially from 2004 to 2005, in recent years this increase has continued to drop off, both locally and nationally. Cornwall as a whole has been consistently higher than the south west and national average, however the gap between Cornwall and the rest of the country has started to decrease. It is probable that the sharp increase in was due to the introduction of the 2002 Enterprise Act which came into effect in 2004 and reduced the number of restrictions that are automatically imposed on undischarged bankrupts and provided for the automatic discharge of nearly all bankrupts after a maximum of 12 months. Cornwall is ranked 13 th of 174 Counties and Unitary Authorities in England and Wales, an area for further consideration could be to identify any similarities between the areas in this top quartile. Chart Cornwall 40 England & Wales Source: The Insolvency Service Analysis: Intelligence Team, Cornwall Council Rate per 10,000 people New personal insolvencies Rate per 10,000 people New personal insolvencies Cornwall 36.4 England & Wales Local Authorities in England & Wales (Including: Counties and Unitary Authorities) Source: The Insolvency Service Analysis: Intelligence Team, Cornwall Council 14 Insolvency Service, Statistics release: Insolvencies in the second quarter 2013 Statistic is for the UK and includes Bankruptcy, Insolvency, Debt Relief Orders, Sequestrations, Protected Trust Deeds, and Individual Voluntary Arrangements 9

10 Individual insolvencies in England, Wales and Northern Ireland are made up of bankruptcy orders and individual voluntary arrangements (IVAs) and debt relief orders (DROs). There has been a steady decrease in new bankruptcy orders since 2009 nationally and locally and the gap between Cornwall and England and Wales has started to decrease, the rate per 10,000 people reducing to 3.1 in The reason for this should be examined further. Similarly to the situation with personal insolvencies Cornwall is ranked 14 th of 174 Counties and Unitary Authorities. Chart 2 New bankrupcy orders Rate per 10,000 people Cornwall England & Wales Source: The Insolvency Service Analysis: Intelligence Team, Cornwall Council New bankruptcy orders 2012 Rate per 10,000 people Cornwall 10.2 England & Wales 7.1 Local Authorities in England & Wales (Including: Counties and Unitary Authorities) Source: The Insolvency Service Analysis: Intelligence Team, Cornwall Council 10

11 IVAs have shown a steady increase since 2004, peaking in Historically Cornwall s figures have been in line with the national picture but since 2011 Cornwall s figures have continued to rise, with national figures falling. Chart 3 Rate per 10,000 people New individual voluntary arrangements Cornwall England & Wales Source: The Insolvency Service Analysis: Intelligence Team, Cornwall Council Rate per 10,000 people New individual voluntary arrangements 2012 Cornwall 12.8 England & Wales 10.5 Local Authorities in England & Wales (Including: Counties and Unitary Authorities) Source: The Insolvency Service Analysis: Intelligence Team, Cornwall Council 11

12 Although only shown across a short period if time, Cornwall has a considerably higher rate of debt relief orders compared to the south west and national picture. This may be due to the high number of self employed people that live in Cornwall, with 15.7% of the population in Cornwall being self employed compared to 9.5% nationally. Being self employed has risks and can lead to higher rates of individual debt. 15 The gap between Cornwall and England and Wales is reducing, this is largely due to a steady increase nationally and a recent decrease in Cornwall. Cornwall is ranked 15 th of 174 Counties and Unitary Authorities. Chart 4 Rate per 10,000 people Cornwall England & Wales New debt relief orders DROs 2009 (Apr-Dec) Source: The Insolvency Service Analysis: Intelligence Team, Cornwall Council Rate per 10,000 people Cornwall 13.4 Debt relief orders 2012 England & Wales 7 Local Authorities in England & Wales (Including: Counties and Unitary Authorities) Source: The Insolvency Service Analysis: Intelligence Team, Cornwall Council 15 Nomis: Local Authority Profile 12

13 There are gender differences in insolvency rates at different ages in the South West. Women have higher rates in the younger age groups whereas men have higher rates from 35 and above. This differs to the national picture where women are most likely to become insolvent between the ages of 35 and 44. It could be speculated that the younger age profile of insolvency for women could be due to the impact of pregnancy and childcare. However, this does not explain why Cornwall differs from the national picture in this regard. Chart < 25 Total Individual Insolvencies in the South West 2012 Male Female Source: The Insolvency Service Rate per 10,000 people Landlord and Mortgage possession statistics Mortgage re-possession levels reached 55,218 in 2011 nationally, which is back to the same levels as in Court claims for re-possession also rose sharply between 2004 and 2008, again reaching levels last seen in the early 1990s. Due to this increase, a number of interventions were implemented which have affected the rates, which significantly dropped since 2009 to below the levels of Surprisingly given the levels of problem debt in the region, Cornwall has considerably lower levels of landlord and mortgage possession claims than the national average. As these levels have been consistently lower than the regional and nationally picture since the year 2000, further investigation is warranted. It appears that in Cornwall, as elsewhere in the country, measures to support homeowners introduced by the government have had an impact. The rate of mortgage possession claims leading to orders reduced in 2010 and 2011 despite having seen a steady increase between 2004 and It is worth noting that increases started in which is before we would expect to see an impact due to the recession. There has been a 32% decrease nationally and 48% decrease in mortgage possession claims for Cornwall in 2011 since the year before. 17 We expect the fall in the number of claims, which can be seen nationally, coincides with lower interest rates and a more proactive approach from lenders in managing Ministry of Justice Landlord and Mortgage possessions data 13

14 consumers in financial difficulties, and various interventions, such as the introduction of the Mortgage Pre-Action Protocol. 18 Cornwall has had seven successful cases of mortgage rescue between 2011 and Chart 6 Quarterly mortgage possession claims issued (per 1,000 households) from 2003 to England & Wales Cornwall Source: Justice.gov.uk Analysis: Intelligence Team, Cornwall Council Rate per 1,000 households Mortgage possession claims leading to orders 2011 England 0.63 Cornwall 0.26 Local Authorities in England & Wales (including:unitary Authorities, Metropolitans & London Boroughs) Source: Justice.gov.uk Analysis: Intelligence Team, Cornwall Council In quarter 3 of 2012 there were 25,756 landlord possession claims which led to an order, this figure has been rising since records began in 2000 but for the first time has stayed constant at 0% nationally. Cornwall however saw these claims decrease significantly by 24% Ministry of Justice Statistics on mortgage and landlord possession actions, November Cornwall Housing, Mortgage Rescue figures as of January

15 Chart 7 Quarterly landlord possession claims leading to orders, 2000 to 2012 Rate per 1,000 households England & Wales Cornwall Source: Justice.gov.uk Analysis: Intelligence Team, Cornwall Council Rate per 1,000 households Landlord possession claims leading to an order 2011 The South West has the lowest level of mortgage and landlord possessions claims leading to orders per 1,000 households (including mortgaged and rented) compared to other regions. Table 2 - Showing levels of mortgage and landlord possessions for quarter Data from the third quarter of 2012 Mortgage possessions leading to an order - Rate per 1,000 households England & Wales 1.08 Local Authorities in England & Wales (including:unitary Authorities, Metropolitans & London Boroughs) Source: Justice.gov.uk Analysis: Intelligence Team, Cornwall Council Total of mortgage possessions leading to an order Landlord possessions Rate per 1,000 households Cornwall Cornwall 0.43 Total of landlord possessions leading to an order South West ,540 National , ,756 Source: Justice.gov.uk 15

16 County Court Judgements (CCJs) County Court Judgements are judgments taken out against individuals for outstanding personal debts of 1 or more. In general, CCJs can be said to provide a good indication of overall patterns of debt. However, it should be recognised that obtaining a CCJ against a debtor is only one of the remedies available to those who are owed money. Recording of this data ceased in 2005 so available data is before the recession, however we would expect to see increased numbers of CCJs since this time. Numbers of CCJs increased in all former district areas between 2003 and There has been an increase in the number of County Court Judgements in England, the South West and Cornwall between 2003 and This is likely to be at least partly because during 2005 the Driver and Vehicle Licensing Agency (DVLA) decided to make use of CCJs for pursuing road tax evaders. However, the increase was greater in Cornwall at 49% compared to only 14 % in the South West. It should be noted that it is possible for one person to be subject to more than one County Court Judgement. Table 3 - Showing increases in numbers of CCJs over 3 years % change England South West Cornwall Source: Neighbourhood statistics The data reinforces the geographical pattern in other maps as there tends to be a higher rate of CCJs in most town areas with a cluster around Camborne and Redruth. There is also a clear concentration in the Clay Country area stretching from Newquay to Liskeard. Unfortunately more up to date data is not available however a map of the 2005 Cornwall data is available on request. 16

17 Financial Stress (Experian) Data provided by Experian, a global financial information company, provides a picture of financial stress. The data looks at a range of factors including: levels of personal debt, income, long term employment prospects, assets and savings to show the likelihood of people living in an area experiencing financial stress. The map below shows the areas in Cornwall that have been assessed as having a larger proportion of customers with high or very high risk of financial stress in 2008, more up to date data is not available currently. There tends to be a higher rate of financial stress in most town areas with clusters around Camborne and Redruth and Truro. There is also a clear concentration in the Clay Country area stretching from Newquay to Saltash. Map 1 17

18 A report completed by Cornwall Council economic development service, commissioned by Cornwall Works has identified the following key messages: 20 Concern was raised at the beginning of the recession over what impact it would have on households which were on low incomes and already subject to financial stress. It was considered useful to pinpoint those areas where the highest levels of risk were, particularly in relation to low income levels. Data from Experian at the output area level shows the number of households within certain income bands and also individual risk levels in relation to financial stress. Financial Stress is a modelled variable which looks at levels of and commitment to debt and the ability to pay. A household can have high levels of stress, despite not having a low income as they might have more credit card debt, mortgage repayments etc. There may also be low income households which also have high levels of financial stress or reduced stress depending on factors such as household formation, lifestyle, financial commitment, inherited wealth etc. There is a clear link between high to very high risk and a high percentage of households on low incomes defined for this work as below 15,000. However, there are other factors which influence financial stress risk. One of these is owner occupation. In fact there is a closer link between low levels of owner occupation and high levels of financial stress than there is with income levels. There may be other factors which affect financial stress risk levels for instance lifestyle. Further investigation is needed here but using the Mosaic typology at LSOA level suggests that younger families with newer homes may be associated with higher levels of risk, despite relatively higher income levels while conversely, lower levels of risk are found in areas with a high proportion of older residents. 20 Financial Stress and income analysis at Output Area level in Cornwall,

19 Council Tax arrears The total council tax arrears (subject to a liability order) for Cornwall as of February 2013 was 5.72 million. About 4% of households are in arrears and subject to a liability order. The map below shows that there tends to be a higher rate of council tax arrears in most town areas with a cluster around Newquay and parts of the west of the region. There is also a clear concentration in the Clay Country area stretching from Newquay to Torpoint. This data is a valuable source of information about financial stress in Cornwall. Ongoing monitoring would allow the council to better understand the ongoing impact of reductions in council tax benefit, welfare reforms and the continuing recession. Map 3 19

20 Cornwall Citizens Advice Bureau (CAB) The CAB in Cornwall provides free, independent, confidential and impartial advice to individuals on their rights and responsibilities. CAB Cornwall holds important data about client contacts that can contribute further to our understanding of problem debt in Cornwall. In 2013/14 CAB Cornwall has been provided with additional funding of 150,000 from Cornwall Council to provide advice on benefits and debt. This is largely in response to Welfare Reforms. This is in addition to other funding streams from Cornwall Council, the Money Advice Service (an independent service set up by government) and various charities. CAB data shows that in the first quarter of 2013/14 the average amount of debt owed by CAB clients was 9, % of the debt owed was on credit cards and 26% on unsecured loans. In the first quarter of 2013, 39% of enquiries related to benefits. This is an increase on previous years when the proportion of enquiries relating to benefits ranged between 24 and 28%. It is possible that this is due to changes to the benefit system due to Welfare Reforms. Debt was the next most common enquiry group. In Q1 of 2013/14, 17% of enquiries related to debt. This is a significant reduction on previous years. However, drawing any conclusions from this data about changes in levels of indebtedness in Cornwall is problematic at this stage for a number of reasons: CAB changed their computer systems for recording data in 2012 This data is only for the first quarter of 2013/14 CAB has suffered redundancies and low levels of volunteering which will have effected service provision in some areas From April 2013 Cornwall Council has provided CAB with a grant to provide benefits advice in the light of welfare reform and specific changes to council tax benefits, and therefore CAB may have been more motivated to record those enquiries with a benefits element than in previous years 20

21 Looking to the future The economic and policy context The forecast for the economy is not good; overall growth of less than 1% is forecast, unemployment rates are expected to stay static, inflation rates are expected to continue to rise and the deficit is higher than hoped. 21 The Welfare Reform Act is now being implemented and for many households this will result in a reduction in the amount of benefits they receive and changes in the way they receive the money. Part of the intention of the reform is to increase incentives to work, but research completed by the Cornwall Council Community Intelligence team has shown a mismatch in where the jobs are and where new job seekers are likely to be. It is expected that public services will face further cuts in their budgets. Councils have to make difficult choices about how they deliver services. Cornwall Council has made a decision that all working age recipients of council tax benefit should pay an additional 25% contribution towards their council tax. They have also agreed to set up a 1m safety net to provide support for people in the greatest need and to give an additional 150,000 to the CAB to enable them to provide information and advice to people affected by the new scheme, but nevertheless, many households are experiencing increased financial pressure on already stretched budgets. These changes suggest that households in Cornwall are likely to continue to feel pressures on their finances and local government will continue to have to make difficult decisions to ensure people get the services they need. It is reasonable to anticipate that there will be increased levels of problem debt and financial stress over future years. Services are already in place to help people with work and provide debt advice, for example with the Citizen s Advice Bureau and Cornwall Works. The council and partners will need to be ready for the anticipated rise in demand and the knock on effects on the services it delivers. Conclusions and implications There is a considerable amount of work regarding debt in Cornwall, as raised by the Commission for Rural Communities. However it is clear from the data available that Cornwall continues to have a serious debt problem compared with other parts of the Country, with some parts of Cornwall seeing high levels across a range of financial exclusion indicators. There are a number of sections within this report that have looked at how Cornwall compares to the national picture and would warrant further investigation, these include: The decrease in new bankruptcy orders since 2009 nationally and locally. The difference nationally and locally between women of the ages and who have personal insolvencies. The considerably lower levels of landlord and mortgage possession claims in Cornwall compared to the national average. Problem debt and financial exclusion have a high cost for individuals, society and public sector organisations. Organisations from the public, private and voluntary 21 Cornwall Economic Monitoring report, November 2013, Economic intelligence team 21

22 sector need to be prepared to respond to the challenges Cornwall faces. The council and partners will need to be ready for the anticipated rise in demand and the knock on effects on the services we deliver at a time when budgets are already stretched. The council and partners can build on existing programmes of support to limit negative effects on the community and avoid escalation of demand for services. Appendix Table showing CAB enquiries data 2007/08 to 2012/13 by number and % (this data is from the per-2012 system. Year 07/08 08/09 * * no. % no. % no. % no. % - Benefits Debt Employment Housing Relationships / Family Legal Consumer Financial (non debt) Utilities Tax Other Health Signposting Immigration Travel Education * Data unavailable 22

23 Bibliography Commission for Rural Communities: Indicators of Poverty and Social Exclusion in Rural England: gov.uk/files/npi%20rural%20indicators% pdf Commission for Rural Communities: State of the countryside update: Financial inclusion, September 2010 Commission for Rural Communities: Rural Money matters: A support guide to rural financial inclusion - August Matters.pdf Cornwall Council, Community Intelligence team: Welfare reform report Cornwall Council: Financial Stress and income analysis at Output Area level in Cornwall, 2010 Credit Action: UK Debt Statistics from Credit Action, January Department of Work and Pensions: Families in Debt Report, 2004 European Commission: Financial services provision and prevention of financial exclusion, March %26langId%3Den&sa=U&ei=xe0AUZGbKqza0QWxu4CIDQ&ved=0CBoQFjAB&usg =AFQjCNFzTd3Ivq7xuBerBjBqSme1YU1sQQ Joseph Rowntree Foundation: Financial inclusion in the UK: Review of policy and practicejuly Nomis: 2013 Local Authority Profile Ministry of Justice: Landlord and Mortgage possessions data, November q1/mortgage-statistical-tables-q xls Office of National Statistics: Personal Insolvency Statistics =4&c=cornwall&d=13&e=4&f=29981&g=430899&i=1001x1003x1006x1005&k=insolv ency&l=2160&o=370&m=0&r=1&s= &enc=1&admincompid=29981& variablefamilyids=8045&xw= Shelter Eviction Risk Monitor report, data/assets/pdf_file/0006/404664/eviction_risk_mon itor_report.pdf 23

24 Notes and definitions Personal insolvencies Individual insolvencies in England and Wales and in Northern Ireland are made up of bankruptcy orders and individual voluntary arrangements (IVAs) (though see also paragraph below regarding the introduction of debt relief orders (DROs) in England and Wales). Insolvent individuals in England and Wales are dealt with mainly under the Insolvency Act A bankruptcy order is made on the petition of the debtor or one or more of his creditors when the court is satisfied that there is no prospect of the debt being paid. (Figures for bankruptcy orders include orders relating to the estates of deceased debtors). There are also individual voluntary arrangements (IVAs) and deeds of arrangement (the latter under the Deeds of Arrangement Act 1914), which enable debtors to come to an agreement with their creditors. Changes to bankruptcy law in England and Wales introduced by the Enterprise Act 2002 came into force on 1 April 2004 the Act made no changes to the existing individual voluntary arrangement regime. 12. The Tribunals, Courts and Enforcement Act 2007 introduced a new route into personal insolvency called the debt relief order (DRO), which came into effect from 6 April DROs provide debt relief, subject to some restrictions, and are suitable for people domiciled in England and Wales who do not own their own home, have little surplus income (no more than 50 a month), assets (other than possibly a car) not exceeding 300, and less than 15,000 of debt. DROs do not involve the courts; they are run by The Insolvency Service in partnership with skilled debt advisers, called approved intermediaries. A DRO lasts for a period of one year before discharge and, as for bankruptcy, there are penalties in place for debtors who seek to abuse the process. Possessions (from MOJ) The possession action figures do not indicate how many houses have actually been repossessed through the courts. Repossessions can occur without a court order being made while not all court orders result in repossession. Claims Issued. A claimant begins an action for an order for possession of property by issuing a claim in a county court. Orders Made. The court, following a judicial hearing (or judicial involvement in accelerated procedure cases) may grant an order for possession immediately. This entitles the claimant to apply for a warrant to have the defendant evicted. However, even where a warrant for possession is issued, the parties can still negotiate a compromise to prevent eviction. Suspended Orders. Frequently, the court grants the claimant possession but suspends the operation of the order. Provided the defendant complies with the terms of suspension, which usually require the defendant to pay the current mortgage/rent instalments plus some of the accrued arrears, the possession order cannot be enforced. Nationally it has been reported that fewer people are losing their homes, due to measures introduced by the government to support homeowners during the current economic climate. In response to a drop of 43% between January-March 2009 as compared to the previous quarter the Lord Chancellor and Secretary of State for Justice, Jack Straw, said: The government has taken decisive action to support homeowners and protect vulnerable families from the threat of repossession Although there is no room 24

25 for complacency, today s figures demonstrate that active intervention works and that problems can be resolved without ending up in court. We will continue to do all we can to help lenders and borrowers work together to find solutions We urge households at risk to talk to their lenders and seek advice as soon as possible. There are in-court advice desk schemes providing advice. County Court Judgements This dataset provides information on unmanaged consumer debt based on County Court Judgments (CCJs) for Middle Layer Super Output Areas (MSOA) in England and Wales during In all cases the figures refer to judgments taken out against individuals for outstanding personal debts of 1 or more. Please note, debts relating to individual businesses or commercial concerns have been excluded from this dataset. Also, in 2005, the DVLA made new use of CCJs for pursuing road tax evaders. In general, CCJs can be said to provide a good indication of overall patterns of debt. However, it should be recognised that obtaining a CCJ against a debtor is only one of the remedies available to those who are owed money. As a result CCJs provide only a partial view of debt, and may include some people who are able, but who choose not to pay. In addition, creditors practices vary and some utilities or businesses may seek CCJs as a remedy more than others. Moreover, the overall number of CCJs may be influenced by factors not directly related to the overall incidence of debt. For example, in 1999 the reform of civil court procedure was introduced to ensure that court action should be a last resort and at the same time, fees were increased by the Department for Constitutional Affairs (DCA). Moreover, there is a view in the credit industry that civil court enforcement is ineffective compared with the outsourcing of debt recovery to a third party. Nevertheless, it should be noted that during 2005 the Driver and Vehicle Licensing Agency (DVLA) decided to make use of CCJs for pursuing road tax evaders. While such issues may make it difficult to assess change over time, the statistics do provide a useful, albeit partial, measure of variations in the incidence of personal debt at small area level. Financial Stress - Experian Unemployment is the most important source of household financial stress during a recession. However, the ability of households to withstand the fall in income when one of their adult members becomes unemployed depends on a number of other factors. These include the individual s assets, other resources and incomes (including employment incomes earned by other household members), and existing levels of debt. Households may also face falls in income not associated with unemployment, such as reduced wages and salaries and lower investment incomes; changes in deductions from income, such as taxes and interest charges on debts; and changes in their costs of living due to inflation. Mosaic Economics allow us to take account of all of these factors and to give a comprehensive picture of the levels of stress the recession is placing on household finances. The mosaic financial stress index measures the severity of financial stress placed on households due to these factors compared to the average stresses placed across all households over the period of the recession and its immediate aftermath ( ). The picture that emerges is largely one of financial stresses being concentrated among already relatively disadvantaged groups, linked to the unemployment impacts identified above. For example, elderly groups are also expected to suffer from raised levels of financial stress, due to depleted wealth and persistently lower investment and pension incomes. At a local level, the impact of the recession on household 25

26 finances is much more dispersed than is the impact on local unemployment. This is because non-labour incomes are not strongly tied to local economic activity but are determined by conditions in national and international investment markets, as well as benefit levels. Nevertheless, the worst affected areas are heavily concentrated in those parts most affected by the recession and by unemployment (particularly the Midlands and North East), with additional hotspots in historically depressed areas like west Central Scotland and South Wales. 26

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