How disabled people are turning to payday loans to cope with benefit cuts

As their benefits are cut and their bills - for care, council tax, food, and the like - remain the same, disabled people are turning to payday loans, credit cards or even illegal lenders to try and make ends meet.

What happens to people when their benefits are cut? It seems an obvious question to ask (if we do something, the consequences of it should, at a minimum, be considered). What are the consequences, then, of dismantling people’s benefits? If, say, you have a debilitating disability that means you can’t earn a wage and your housing benefit is cut while your council tax is increased. The need to eat, be housed, and have the lights on doesn’t go away. Nor, let’s assume, does your disability or the multiple extra needs that come with it. Money to pay for those things still has to come from somewhere. That seems like basic economics. If we can agree human beings need to eat and a disabled person who, say, can’t lift themselves onto a toilet, needs (paid) support to do that, we can agree that removing the money that helps them meet those needs (either directly or by charging them elsewhere and thereby leaving them unable to pay for the need in question) would leave them having to find that money somewhere else. So where do they go? Where are disabled people going for money to live on?

Payday loan companies, according to new research by the disability charity Scope. Or credit cards or even illegal lenders. In fact, half of disabled people have used credit cards or loans to pay for basics like food or clothes in the past twelve months. 

Susan Donnelly, 54, is in £7,000 worth of debt. She’s unable to earn a wage due to severe osteoporosis, emphysema, asthma and a digestive condition that means she can’t eat solid foods, and when her benefits wouldn’t stretch, found herself turning to loan companies.

“When you get your social security letter it tells you on there the amount of money the government says you need to live on,” Susan tells me. “But by the time you take out all my bills, I have nothing to live on.”

The cycle of borrowing and interest soon hit. Refused further loans because she couldn’t pay back what she owed, and needing to eat and pay bills, Susan turned to credit cards and doorstep loans.

She’s taken out a £900 loan from a doorstep loan company. They’re charging her £1,080 of interest. She has to pay back almost £2,000 over two years; over twice what she borrowed. The debt is simply multiplying.

“I have £400 worth of rent arrears and the landlord is threatening bailiffs,” she says. “I can’t afford to put my heating on. I don’t use my oven any more. I’m scared to run up any bills. By 7pm, I’m huddled up in bed with my dog.”

Susan was struggling before the benefit changes hit, but is now losing £70 a week. She lives alone in a two-bed house in London and the bedroom tax means she’s now losing £12 housing benefit a week. Her "spare" room is filled with medical equipment and a bed for a carer when she’s too ill to cope by herself. Another £4 a week goes on a network alarm. (She’s been found unconscious twice before. Needing the emergency button though, as is the case with all needs, doesn’t mean she can afford it.) 

She was previously exempt from council tax but now has to pay over £12 a month for that too. Her care bill takes another chunk, with social services wanting £57 a week towards her care since the cuts came in in April. Her incontinence pads – £10 a week – used to be paid for by her health authority but she now has to find that money herself.

“How am I meant to pay these bills?” she says. “Realistically, I can’t afford my incontinence pads as well as the council tax.”

In seems almost inevitable, when you hear Susan talk, that people in her situation would turn to credit cards or payday loans.  Desperate people do desperate things, and as the Government makes £28bn worth of disability cuts while stalling on tougher regulation of Wonga and the like that fill the gap, there’s an industry more than ready to take advantage of that desperation. More than 30,000 people with payday loans have sought debt advice from just one charity, StepChange, in the first six months of 2013 – almost as many as in the whole of 2012

Disabled people, though, are three times more likely to draw on doorstep loans than non-disabled people, Scope have now found. Understanding the scale of the problem for the wider public perhaps makes that fact all the more alarming.

Talking about the findings, Richard Hawkes, Chief Executive of Scope, says it comes down to what type of society we want to live in. He’s got a point. Call me a bleeding heart liberal, but personally, I’d like to live in a society where disabled people can eat without taking out a payday loan. And where the benefit system isn’t designed in a way that almost actively encourages it.

“In 2013, if we want disabled people to live independently and pay the bills we cannot take billions of pounds of support away, particularly while disabled people are financially vulnerable, and less able to build up their own financial safety net,” Hawkes stresses. “The Government can no longer ignore the big picture of its welfare reforms. It must start focusing on policies that build disabled people’s financial resilience, so that they do not have to turn to risky credit and face slipping into debt.”

Sometimes credit can be good, of course. It can help (disabled) people deal with fluctuations in income or fund emergency expenses, as Scope are the first to say. But there are risks associated with credit – such as people like Susan using them to pay for everyday essentials or at times of distress, when they may overestimate their ability to make repayments, or, are fully aware they can’t, but simply have no other choice but to borrow anyway. Disabled people are disproportionately exposed to these risks. They find it harder to access low cost credit than if they weren’t disabled – a cruel irony when being disabled means it’s probably needed more. (Less than one in five disabled people use an arranged overdraft, compared to one in three non-disabled people. Worrying, yes. But this isn’t really surprising against a backdrop where disabled people are less likely to even have a bank account.)

Many banks are unwilling to lend against benefits that they perceive as unreliable. As one disabled man told Scope anonymously, it’s “virtually impossible to get any credit when on benefits... Trying to get a credit card is a nightmare...they are geared for people who work…”

This has only worsened since the Social Fund was abolished this April and replaced with new local authority welfare schemes. The Social Fund, among other things, provided Crisis Loans – interest-free loans to help people meet immediate short-term needs. With the localisation of the Social Fund, there has been no statutory duty on local authorities to provide access to equivalent forms of credit or grants, or to ring-fence budgets in order to make such provisions. This will affect 844,360 disabled people who may lose up to £43.2m in Crisis Loans, according to cumulative impact analysis conducted by Scope and Demos.

Clearly, the lack of credit options for disabled people is a different problem than the fact they are using credit cards or payday loans in order to be able to eat. Disabled people are using credit to meet daily living expenses because their income is, and always has been, disproportionately low and their needs disproportionately high – and benefits, the framework offering some (consistent) support, is now being pulled away. But that people who are disabled are less likely to be able to get low cost credit when they need it is part of a wider climate of financial instability for a certain group in society; one of exclusion, where options are limited, debt is deep, and "choice" is now a trick of a word that means high risk, high interest loans or no food to eat. Or, as Susan put it, paying council tax or buying incontinence pads.

There’s a picture built of people who are most likely to face financial pressures, who are less likely to have secure, low-cost safety nets in place, and who are now the ones being left to take the brunt of benefit cuts.

Linda Isted, of the charity Debt Advice Foundation, tells me that with the level of current focus on benefit cuts in the media, concern about reduction in benefit income is often a trigger for people to seek help. “In many cases, though, there is existing debt, sometimes at an unmanageable level, and so any reduction in income is an extra factor in what is already a problem debt situation,” she adds.

“I had no idea [these benefit changes] were coming into action,” Susan tells me when we discuss how quickly things worsened for her. She was already getting into debt by taking out doorstep loans, and as the multiple benefit cuts hit her in April, that debt just spread.

She has a £600 gas bill waiting, and a £100 electric. The bits of paper keep coming through the door, she says, but she can’t do anything with them.

“I can’t physically pay,” she tells me. “I’ve barely got enough money for food let alone anything else. I’m living inside these four walls. I’ve got nothing.”

She gives a little laugh at a couple of points as we talk, as if at this stage, there is nothing else she can do. Her pancreatic illness is worsening with the stress, she says, and she can barely think about the money she owes the doorstep loan company.

“I can’t do anything but cry [when I think about the interest],” she tells me. “I can just see myself getting deeper and deeper in debt and then bailiffs coming in and taking the furniture. That’s the only way I can see of possibly getting out of this. It’s horrific.”

If you are struggling with your debts, you can contact a free, independent debt advice charity such as Debt Advice Foundation.  Their helpline is 0800 043 40 50, or you can go to www.debtadvicefoundation.org

What do you do when your housing benefit is cut while your council tax is increased? Photo: Getty

Frances Ryan is a journalist and political researcher. She writes regularly for the Guardian, New Statesman, and others on disability, feminism, and most areas of equality you throw at her. She has a doctorate in inequality in education. Her website is here.

ELLIE FOREMAN-PECK FOR NEW STATESMAN
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The triumph of Misbah-ul-Haq, the quiet grafter

How Misbah redeemed Pakistani cricket.

It was an incongruous sight: the entire Pakistani cricket team doing press-ups on the revered pitch at Lord’s, led by its captain, Misbah-ul-Haq. This unusual celebration marked not merely a Test match victory over England on Sunday but something greater: the rehabilitation of Pakistani cricket.

Seven years earlier, the Sri Lankan team bus was en route to the cricket stadium in Lahore for the third day of a Test match against Pakistan when it was attacked by Islamist militants. Gunfire killed six police officers and a driver; several Sri Lankan cricketers were also injured. That was the last Test match played in Pakistan, which, despite protestations, opponents consider too dangerous to visit.

A year later, Pakistan toured England for a Test series. The News of the World alleged that in the final match at Lord’s three Pakistani cricketers had conspired to bowl no-balls in exchange for money. All three received bans of five years or more for corruption. The entire squad was lampooned; police had to shield its members from abuse as they arrived home.

Misbah was on the periphery of all of this. Aged 36 at the time, he was dropped from the squad before the English tour and seemed unlikely to play international cricket again. But the turbulence engulfing Pakistani cricket forced the selectors to reassess. Not only was Misbah recalled but he was made captain. “You have to ask yourself,” he later said: “‘Have I been the captain because they supported me, or because they had no alternatives?’”

Pakistani cricket prizes and mythologises teenage talent plucked from obscurity and brought into the international side. During his decade as captain, Imran Khan picked 11 teenagers to make their debuts, often simply on the basis of being wowed by their performance in the nets. Misbah shows that another way is possible. He grew up in Mianwali, a city that was so remote that: “The culture there wasn’t such that you thought about playing for Pakistan.”

At the behest of his parents, he devoted his early twenties not to his promising batting but to gaining an MBA. Only at 24 did he make his first-class debut, strikingly late in an age when professional sportsmen are expected to dedicate all their energy to the game from their teenage years.

Pakistani cricket has always been “a little blip of chaos to the straight lines of order”, Osman Samiuddin writes in The Unquiet Ones. Misbah has created order out of chaos. He is unflappable and methodical, both as a captain and as a batsman. His mood seems impervious to results. More than anything, he is resilient.

He has led Pakistan to 21 Test victories – seven more than any other captain. He has done this with a bowling attack ravaged by the 2010 corruption scandal and without playing a single match at home. Because of security concerns, Pakistan now play in the United Arab Emirates, sometimes in front of fewer than a hundred supporters.

Misbah has developed a team that marries professionalism with the self-expression and flair for which his country’s cricket is renowned. And he has scored runs – lots of them. Over his 43 Tests as captain, he has averaged at 56.68. Few have been so empowered by responsibility, or as selfless. He often fields at short leg, the most dangerous position in the game and one usually reserved for the team’s junior player.

Misbah has retained his capacity to surprise. As a batsman, he has a reputation for stoic defence. Yet, in November 2014 he reached a century against Australia in just 56 balls, equalling the previous record for the fastest ever Test innings, held by Viv Richards. The tuk-tuk had become a Ferrari.

Late in 2015, Misbah tried to retire. He was 41 and had helped to keep Pakistani cricket alive during some of its darkest days. But the selectors pressured him to stay on, arguing that the team would need him during its arduous tours to England and Australia.

They were right. His crowning glory was still to come. The team arrived in England following weeks of training with the national army in Abbottabad. “The army people are not getting much salaries, but for this flag and for the Pakistani nation, they want to sacrifice their lives,” Misbah said. “That’s a big motivation for all of us. Everyone is really putting effort in for that flag and the nation.”

Now 42, almost a decade older than any cricketer in England’s side, Misbah fulfilled a lifetime’s ambition by playing in a Test match at Lord’s. In Pakistan’s first innings, he scored a century and celebrated with push-ups on the outfield, in homage to the army’s fitness regime and those who had had the temerity to mock his age.

When Pakistan secured victory a little after 6pm on the fourth evening of the game, the entire team imitated the captain’s push-ups, then saluted the national flag. The applause for them reverberated far beyond St John’s Wood.

“It’s been a remarkable turnaround after the 2010 incident,” Misbah-ul-Haq said, ever undemonstrative.

He would never say as much, but he has done more than anyone else to lead Pakistan back to glory. 

Tim Wigmore is a contributing writer to the New Statesman and the author of Second XI: Cricket In Its Outposts.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt