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.

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Cabinet audit: what does the appointment of Andrea Leadsom as Environment Secretary mean for policy?

The political and policy-based implications of the new Secretary of State for Environment, Food and Rural Affairs.

A little over a week into Andrea Leadsom’s new role as Secretary of State for Environment, Food and Rural Affairs (Defra), and senior industry figures are already questioning her credentials. A growing list of campaigners have called for her resignation, and even the Cabinet Office implied that her department's responsibilities will be downgraded.

So far, so bad.

The appointment would appear to be something of a consolation prize, coming just days after Leadsom pulled out of the Conservative leadership race and allowed Theresa May to enter No 10 unopposed.

Yet while Leadsom may have been able to twist the truth on her CV in the City, no amount of tampering will improve the agriculture-related side to her record: one barely exists. In fact, recent statements made on the subject have only added to her reputation for vacuous opinion: “It would make so much more sense if those with the big fields do the sheep, and those with the hill farms do the butterflies,” she told an audience assembled for a referendum debate. No matter the livelihoods of thousands of the UK’s hilltop sheep farmers, then? No need for butterflies outside of national parks?

Normally such a lack of experience is unsurprising. The department has gained a reputation as something of a ministerial backwater; a useful place to send problematic colleagues for some sobering time-out.

But these are not normal times.

As Brexit negotiations unfold, Defra will be central to establishing new, domestic policies for UK food and farming; sectors worth around £108bn to the economy and responsible for employing one in eight of the population.

In this context, Leadsom’s appointment seems, at best, a misguided attempt to make the architects of Brexit either live up to their promises or be seen to fail in the attempt.

At worst, May might actually think she is a good fit for the job. Leadsom’s one, water-tight credential – her commitment to opposing restraints on industry – certainly has its upsides for a Prime Minister in need of an alternative to the EU’s Common Agricultural Policy (CAP); a policy responsible for around 40 per cent the entire EU budget.

Why not leave such a daunting task in the hands of someone with an instinct for “abolishing” subsidies  thus freeing up money to spend elsewhere?

As with most things to do with the EU, CAP has some major cons and some equally compelling pros. Take the fact that 80 per cent of CAP aid is paid out to the richest 25 per cent of farmers (most of whom are either landed gentry or vast, industrialised, mega-farmers). But then offset this against the provision of vital lifelines for some of the UK’s most conscientious, local and insecure of food producers.

The NFU told the New Statesman that there are many issues in need of urgent attention; from an improved Basic Payment Scheme, to guarantees for agri-environment funding, and a commitment to the 25-year TB eradication strategy. But that they also hope, above all, “that Mrs Leadsom will champion British food and farming. Our industry has a great story to tell”.

The construction of a new domestic agricultural policy is a once-in-a-generation opportunity for Britain to truly decide where its priorities for food and environment lie, as well as to which kind of farmers (as well as which countries) it wants to delegate their delivery.

In the context of so much uncertainty and such great opportunity, Leadsom has a tough job ahead of her. And no amount of “speaking as a mother” will change that.

India Bourke is the New Statesman's editorial assistant.