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A paper recently published in New Political Economy by a team of academics led by Hulya Dagdeviren, Professor of Economic Development, University of Hertfordshire, concludes that austerity measures over the past decade, especially the cuts in welfare and local government budgets, accompanied by a range of disciplinary measures, pushed the very poor into various forms of debt by severely limiting their means of subsistence.
The study is the first to review the impact of the ten-year period of austerity measures on indebtedness amongst low income households, as well as the impact of the recession immediately after the 2008 financial crisis. The study found that while the proportion of households with financial liabilities (excluding mortgages and student loans) declined slightly in 2006/2008 – 2014/2016, average household debt increased by around 43 per cent.
Pre-crisis - Period - Income - Household - Debt
Unlike the pre-crisis period when low income household debt reflected aspirations for home ownership or 'keeping up with the Joneses', under austerity debt or arrears for essential needs such as rent, food, energy and water, account for a significant proportion of low income household indebtedness. In contrast to what is usually presumed, the study found that creditors are not only banks, payday lenders or pawn shops, but also local authorities (LAs) as well as private companies.
The debt-to-income ratio for the poorest 10 percent of the population grew from 140 percent in 2005-6 to 190 percent in 2012-2013, representing the largest growth in the degree of indebtedness in...
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