68 per cent of British people think lenders have too much power over borrowers. The finding comes from new online polling conducted by YouGov for the think tank Theos and St Paul’s Institute, as part of new research into debt.
This research is being launched at a time when more than 16 million people in the UK have less than £100 in savings 1. Personal debt is now at 90 per cent of GDP 2 while unsecured debt is at an all-time high.3
In the poll, over a quarter of those who have been in debt in the last two years (27 per cent) said they had been badly affected by it in their daily lives. One third (33 per cent) who had suffered debt in the last two years said that it had a negative effect on their relationships with friends and family.
The impact of debt on our relationships is of crucial importance when evaluating debt today, according to researcher Dr Nathan Mladin who says, “Debt is ultimately a form of social interaction, so must be assessed as such. There are debt relations that clearly harm individuals and communities (e.g. payday loans with excessive interest that trap people into debt), and others that contribute, directly or indirectly, to their wellbeing.”
The findings come ahead of the launch of a new report into the ethics of borrowing and lending, and its impact on families, communities and nations. “Forgive Us Our Debts”: lending and borrowing as if relationships matter is co-authored by Dr Nathan Mladin of Theos and Barbara Ridpath on behalf of St Paul’s Institute.
The report argues that debt is not just an economic issue but must be seen as fundamentally about relationships between debtors and lenders, relationships which need to be reimagined. Where once a borrower went to their local bank to talk about a loan, most often now an agency provides an algorithmic credit score for that borrower, making relationships increasingly distant and anonymous and leaving the vulnerable often most disadvantaged.
Drawing on Christian ethics and in consultation with City professionals, academics, and representatives of the debt and money advice sectors, the report suggests:
• An investigation into greater use of debt mitigation – or forgiveness – done appropriately and without risking the foundations of our financial system ie. IVAs at the personal level, bankruptcy as an option at a small business level and debt forgiveness for the poorest countries at a national level.
• The re-establishment of a usury rate, i.e. a level of interest above which rates are deemed exploitative
• Corporate debt to be put on an equal tax footing with equity, eliminating the tax deductibility of debt and considering the elimination of the tax on corporate dividends.
• More investment (private, civic and governmental) in growing the social lending sector.
• Increased restrictions on consumer credit advertising.
• Rethinking UK University tuition loans including an exploration of the introduction of needs-based financing.
