Dood Reveals 'Debt Tax' on Poorest Households

Debt on our Doorstep today released an analysis of household debt in the UK showing that one third of the U.K’s poorest households are paying over 11% of their annual incomes servicing unsecured credit debts.

The move comes prior to the start of the ‘UK Credit Options’ Conference, organised by Citizens Advice Scotland and Debt on our Doorstep for 28 /29th May 2007, which will bring together over 100 delegates per day to discuss the need for responsibility in lending.

Our analysis shows that whilst poorer households are less likely to get access credit (37%) than their richer counterparts (60%) – they take on a greater level of debt relative to their income. This translates into higher debt repayments as a % of their income for poorer households, making debt act as a form of taxtion on the poor.

Damon Gibbons, Chair of Debt on our Doorstep, commented:

“Repaying a growing debt burden reduces the disposable incomes of the poorest households more than it does those of their richer counterparts. For the poorest 20% of households with debts, the growth in debt repayments will completely offset any growth in their income as a result of tax and benefit changes that have been made in the past 6 years and pull households back under the Government’s poverty line.”

“Because debt is not spread evenly across households, it acts like a form of regressive taxation, magnifying existing inequalities in the income distribution. Further investigation by the Government is urgently required. To date, none of their official reports on indebtedness have looked at this issue”.

A full copy of the paper, which was presented to a conference on Responsible Credit at the University of Trento, Italy, earlier this week is available here.