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When does the light at the end of the tunnel appear for people in debt?

Our client research shows 3 in 4 are making progress after 15 months, but few have built financial resilience

The latest findings from our continuous tracking survey measuring the charity’s client outcomes show that nearly one in eight people are completely debt-free 15 months after advice, and three in four are making at least fair progress.

Our previous report on the survey concentrated on results among clients at 3 months after advice. This time, the focus is on people’s experience 15 months after advice. 

There are some hugely encouraging findings. Notably, 85% of clients who had received a recommendation had either followed it and said it had sorted their debt problem out or were still following the recommendation and making progress.

However, there is a marked difference between heading towards becoming debt-free and building long-term financial resilience for the future. 

Barriers to achieving resilience are still very clear 15 months after advice, largely because most clients have limited ability to build up any savings buffer. Most are still having to put in significant effort just to make ends meet on the income they have at that point.

Four out of five clients 15 months after advice say that having enough money put by to replace the fridge or washing machine in an emergency is very or fairly important to them. 

Yet only 9% have achieved this, and only 20% are close to it. These results are echoed almost exactly when clients are asked about having some money put aside in case their income drops.

Debt is closely linked with physical and mental health problems and vulnerabilities. People’s perception of their own wellbeing, alongside their progress on dealing with their debts, is therefore a valuable outcome measure included in the tracking survey. 

It helps StepChange gain more understanding of the extent to which debt advice has a wider beneficial impact. Using both ONS wellbeing measures, and the Short Warwick Edinburgh Mental Wellbeing Scale, there is an improvement in people’s wellbeing scores by 15 months, compared with the scores three months after advice.

However, the average scores of people 15 months after debt advice still compare unfavourably with the general population. For example, when asked “Overall, how anxious did you feel yesterday?”, clients at 15 months had a lower anxiety score than at 3 months (4.4 down from 4.82), but still much higher than the average for all UK adults (2.9). And people who are making less progress towards resolving their debts tend also to have lower wellbeing scores.

Overall, 17% of clients at 15 months had achieved a good outcome across all three indicators of wellbeing, progress towards debt, and financial resilience, while 9% scored poor outcomes across all three measures.

Clients with negative budgets were nearly six times more likely to experience poor outcomes on all three indicators (17%), than those with positive budgets (3%). 

By contrast, clients with positive budgets were only a little more likely to experience good outcomes on all three indicators (20%) than those with negative budgets (15%). This reflects the difficulty of achieving financial resilience for most clients, even those making good progress on their debts and experiencing an uplift in wellbeing.

Launching the report at a roundtable event today with stakeholders including representatives from HM Treasury, the Financial Conduct Authority, the Money & Pensions Service and other debt charities, StepChange Debt Charity CEO Phil Andrew said:

“To judge the impact of debt advice, we have to look at more than just how well it helps people to resolve their debt. A year and a quarter after taking advice, the vast majority of our clients are making progress on resolving their debt, and on average are also experiencing an upturn in their wellbeing. 

"That doesn’t mean some clients don’t face profound, ongoing problems – especially if their fundamental problem is a very low income - but debt advice is clearly of demonstrable value to most. 

"What is more challenging is that few people have yet managed to build up any level of financial resilience, whatever their wider circumstances. This raises the obvious risk of falling back into debt again if and when any kind of financial knock occurs.

“As we develop new services to try to help people avoid problem debt, this challenge is uppermost in our minds. As a debt charity we cannot solve the problem of financial resilience alone, though. 

"A joined up approach is needed by government, regulators, public services and financial institutions to help financially vulnerable households reduce their need to borrow and increase their ability to save. 

"Otherwise, getting into and then needing help to get out of problem debt runs the risk of becoming a repeated cycle for many people, through no fault of their own.”

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