Evidence submitted by Relate (HHF0011)

Household debt and family relationships

Relate evidence submission to the Treasury Committee’s inquiry on Household finances: income, savings, and debt

Dr David Marjoribanks, Policy and Research Manager David.Marjoribanks@relate.org.uk 0207 554 2889

1. Relate is the UK’s leading relationship support charity, serving more than one million people through information, support and counselling every year. Our vision is a future in which healthy relationships are actively promoted as the basis of a thriving society. We aim to develop and support healthy relationships by:

• Delivering inclusive, high-quality services that are relevant at every stage of life;
• Helping couples, families and individuals to make relationships work better; and
• Helping both the public and policy makers improve their understanding of relationships and what makes them flourish.

Relate will in 2018 have been providing counselling and other relationship support services to individuals, couples, and families for 80 years. We know from our experience and research that good quality relationships are essential foundations of adults’ wellbeing and children’s long term life chances. We also know from our counselling rooms that debt and money can be a very common – and particularly difficult – source of conflict within relationships.

2. Relate recently published a landmark research report, supported by many of the leading debt advice agencies (including StepChange Debt Charity, Citizens Advice, the Money Advice Trust, the Money Advice Service, Christians Against Poverty, and AdviceUK), on the links between household debt and relationships. This research (In too deep: An investigation into debt and relationships, launched on 28th November) demonstrated how relationships and finances can affect each other. It evidences the impacts of debt problems on family relationships, as well as the role of relationships in helping – or hindering – people in dealing with debt problems. Based on this research, as well as our expertise as the UK’s leading relationships charity, we are submitting evidence to this inquiry on household finances, drawing the Committee’s attention to how household finances and personal relationships can be closely intertwined and impact on each other. (We restrict our submission to evidence from this research on the issue of household indebtedness, the impacts of over-indebtedness on family relationships, and the important inter-generational and relational context for financial capability.)
3. The research has demonstrated that struggling with debt problems can lead to increased conflict, stress, poorer communication, increased blame and mistrust, and – as a consequence of this pressure – relationship breakdown:

• One in four people (who have been in debt) say debt had a negative impact on their couple relationship;
• One in ten people argues with their partner about debt/finances at least once a fortnight;
• One in ten people has experienced a relationship breakdown due (at least in part) to debt; and
• People with arrears with bills were more than twice as likely to experience relationship breakdown as those who were up to date with bills.

Over-indebted people are more likely than the population as a whole to have children, so when debt is a causal factor in relationship breakdown, the potential harmful impacts often extend beyond the partners to their children.

4. The research also examines the contribution relationships can make towards people’s debt problems. For example, the income shock of relationship breakdown can be a significant reason why people accrue debt; abusive relationships can similarly result in debt issues; and relationships can have notable financial implications:

• A third of debt advice clients cite relationship breakdown as a cause of their debt problems;
• A third of debt advice clients have experienced difficulty accessing credit due to being financially associated with a partner/ex-partner; and
• One in ten Relate users have experienced a partner controlling their access to their income, benefits, bank accounts or savings.

5. The research also highlights the ways in which relationship dynamics can influence how people manage debt and finances and influence how people manage their debt and money and their financial capability. For example, when people are not able to communicate openly and effectively about debt and their financial situation, and hide debt from each other, this can become particularly troublesome – both for their relationships, and for people’s ability to manage the debt. Debt advisers told us in the research how difficult this can make helping clients to manage their debts. The research showed ‘hidden’ debt to be very prevalent:

• One in seven British adults who have been in debt have hidden debt from a partner – and half are still hiding it;
• Almost half of debt advice clients have hidden debt from a partner; and
• One in four people in problem debt have hidden debt from a partner.

6. Other important relationship dynamics than can influence finances include whether or not couples/family members have shared approaches to managing debt and money; and whether they are able to understanding one another’s emotional/psychological meanings that they attribute to money and debt which can often have their roots in our family of origin. Having different emotional meanings and values attached to debt and money can be central factors underlying conflicts within relationships over money, and six in ten Relate counsellors say that financial conflicts carry emotional meanings most/all of the time.
7. Couples who make decisions together experience fewer financial problems. The research showed that Relate users who made financial decisions together were less likely than those who managed them separately to have experienced debt (and problem debt in particular), to have hidden debt or had a partner hide debt, to have damaged a partner’s credit rating or had their own damaged by a partner, and less likely to have experienced financial abuse. They were more likely, on the other hand, to say debt brought them together and increased positive communication, to have good financial communication, and to say they never argue about money.
8. The research uncovered strong indications of demand among people with debt problems for more holistic advice services and closer working between money advice and relationship support:

• A third of debt advisers perceived large/very large demand among clients for relationship support;
• One in three people with a partner say support to talk to them about debt and finances would benefit them; and
• 46% of heavily-indebted people say they would benefit from support in talking to their partner about money.

The research also found strong support from both debt advice practitioners and relationship counsellors for closer working across sectors to provide more holistic support for families experiencing the impacts of debt problems on relationships or vice versa. Increasing collaboration between relationship support and debt advice may deliver significant benefits. Enhancing families’ communication, positive problem solving, and conflict management skills, in conjunction with providing debt advice to families in problem debt, may increase both financial capability and relationship quality.

9. In light of these findings, we would encourage the Committee to call upon the Government to:

1. Fund free relationship support for low-income people with debt who are experiencing relationship distress, or pressure on relationships as a result of debt problems, to overcome the cost barrier to relationship support for families on low incomes and enable relationship support services and debt advice services to work more closely together and support greater signposting.
2. Support a programme of information, guidance and preventative support for relationships and finances, backed by a Government funded public awareness campaign, to increase understanding of the links between debt/finances and relationships. Information could also be targeted at particular groups at important times of transition – e.g. providing information on what living together means for finances and the ways in which relationships and finances can intertwine for new joint benefit claimants via JobCentres, or new joint tenancies via estate agents.
3. Establish a Families and Relationships Steering Group to support delivery of the UK Financial Capability Strategy, focused on the intergenerational and relational context of financial capability, and with its own action plan, focused on the intergenerational and relational context of financial capability, aiming to:
• Increase awareness of the links between relationships and finances and help consumers to understand the contribution of relationships dynamics to debt and financial capability and the importance of financial communication within relationships
• Work with the debt advice and relationship support sectors to increase awareness and aid better signposting as well as to test coordination/co-location
• Support the development of pilot interventions between debt advice and relationship support providers
4. Coordinate policy relating to family relationships and debt/financial capability across government, to avoid the unintended consequences of government policy in one area potentially working against the objectives of policy in another and reduce the risk of people falling through gaps, and to lead to smoother customer journeys through different public services. A family relationships task force or cabinet committee focusing on the links between family relationships and family finances across government could achieve a coordinated approach, for example.
5. Create an Innovation Fund to test out different ways of working collaboratively with families affected by debt and relationship difficulties, and include testing the sequencing of relationship and debt support and at what point in families’ journeys it is most effective to offer what intervention.
6. Work with partners to map local support services for families with debt problems and relationship distress, to help identify what services are available in local areas for referring partners to signpost clients into and to enable service providers to develop relationships locally.
7. Deliver on its Manifesto commitment to introduce a breathing space scheme for families with debt problems and work with the free debt advice sector to ensure this provides adequate protection for families in debt.

December 2017

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