Home > Website archive > News and media > News archives > 2014 > 07 > Rising prices, falling wages and welfare cuts – a recipe for debt in Newham

Rising prices, falling wages and welfare cuts – a recipe for debt in Newham

Households in one of the poorest boroughs in London face crippling debt and financial pressures despite a widespread desire to work and an aversion to high cost lenders, according to a new report from LSE launched today.

Pawnbrokers Canning TownOver the course of 18 months LSE researchers conducted 122 in-depth interviews with low income households in the London Borough of Newham , including those at risk of debt and vulnerable to the impact of welfare reforms, to explore residents’ economic resilience.

They found the combination of low wages, rising bills and benefit cuts left many residents financially struggling.

Almost all interviewees who were unemployed wanted to work, and those who were underemployed, or in insecure jobs, wanted to work more.

Many residents felt ambivalent about claiming benefits and had a strong aversion to pawnbrokers and payday lenders, which are increasingly common in Newham.

Despite the financial pressures, most interviewees were resourceful in making ends meet. Many were adept at reducing outgoings, actively finding cheaper ways to manage food, energy and other costs while maximising household income. Some spoke of how they had to cut back on food and heating. Nearly all the residents interviewed received most support from family and friends.

anne_powerAnne Power, Professor of Social Policy at LSE, who led the study, commented:

The overwhelming majority of interviewees are trying hard, want to be self-reliant and are motivated to make their lives work. Public sector cuts, reductions in children’s and youth activities, and restricted hours for GP surgeries, are inevitably affecting them.  Small budget cuts from many sides are squeezing already low incomes and making it hard to meet even the most basic needs.”

Most interviewed residents were vulnerable to financial shocks –such as bereavement, redundancy, accidents or eviction. Insecure housing is a particular problem for Newham as a growing proportion of residents are in increasingly expensive, privately rented accommodation.

One interviewee, Anne, got into severe debt after her husband died, and she was diagnosed with cancer and, later, depression. She was made redundant and eventually evicted after she couldn’t pay her rent anymore.

Anne’s story, and those of many others in the report, highlight the pressure that changes to welfare and spending cuts are having on both residents and public services.

In light of these cuts, the report argues Newham Council should harness and promote the range of voluntary, community and faith-based support taking place in the Borough, such as food banks, advice centres and Community Links.

In the absence of centrally-funded welfare support, these activities are a lifeline to those who find themselves in debt.

Commenting on the findings of the report, Mayor of Newham, Sir Robin Wales, said:

What is very clear from this report is that debt affects people who are in work as much as those who are solely dependent on benefits.  The Newham residents interviewed are not people frittering away cash on luxuries. They are struggling with the day to day challenges of life and trying to get by as best they can.

“I am not going to stand by while the poorest people pay the biggest price. The number of money lenders, pawn brokers and hire purchase stores in the borough taking advantage of vulnerable people in Newham makes me angry. There’s no place for loans with interest rates of 2000 per cent and this is why we want to create an ethical and affordable payday loan. We’ll stand up for residents against payday lenders and rip-off shops, giving people a fair deal to help change their lives and become more financially independent.”


For more information please contact Daniel O’Connor, LSE Press and Information Office 020 7955 7417 oconnord@lse.ac.uk .


The report Facing Debt: Economic Resilience in Newham  was  launched at a meeting on Friday 18 July at the London School of Economics and Political Science. 

The meeting included a panel discussion with Polly Toynbee (Guardian), Vidhya Alakeson (Resolution Foundation), Professor Anne Power (LSE), Sir Robin Wales (Mayor of Newham).

The full report is available here Facing Debt 

The report was produced by the LSE Housing and Communities Unit, part of the Centre for Analysis of Social Exclusion at LSE.

LSE Housing and Communities is a research unit within the Centre for Analysis of Social Exclusion (CASE) at the London School of Economics led by Professor Anne Power. CASE is a multi-disciplinary research centre which focuses on the exploration of different dimensions of social disadvantage, particularly from longitudinal and neighbourhood perspectives, examining the impact of public policy. We aim to understand the social dynamics of disadvantaged neighbourhoods; promote models of housing and neighbourhood management; develop ways to support community and resident self-help action, especially in social housing areas; and shape government policy.

18 July 2014