Link between mental health issues and problem debt must be broken, says charity

'Financial difficulties should not be an inevitable consequence of falling ill, splitting up with your partner, or losing your job,' StepChange says

One in five of the almost 30,000 people advised by StepChange in 2017 had an additional vulnerability, on top of their financial difficulties (Shutterstock)

Financial firms must do more to help vulnerable people, such as those with mental health problems, who fall into debt, a leading charity has said.

StepChange said people with a vulnerability who contact the charity about problem debt are in a “notably worse” financial situation than those who do not have a vulnerability.

The government also has questions to answer about the effects of benefits cuts, the charity said.

StepChange’s figures revealed that last year, two in five of its vulnerable clients who were receiving benefits were unable to make ends meet, even after budgeting advice.

One in five of the almost 30,000 people advised by StepChange in 2017 had an additional vulnerability, on top of their financial difficulties.

Mental health affected 43 per cent of those, making it “overwhelmingly” the most common issue.

This was followed by physical disability which affects 4.7 per cent, cancer which affects 4.6 per cent, and poor health, affecting 4.1 per cent.

“Financial difficulties should not be an inevitable consequence of falling ill, splitting up with your partner, or losing your job,” the report said.

​StepChange chief executive Phil Andrew said: “With mounting evidence that vulnerable people are not always being adequately supported in their times of need – including the DWP’s own recent survey on the impact on claimants of Universal Credit – it is only reasonable to ask whether changes to the welfare system are creating too many negative and stressful impacts on people who are least in a position to deal with them.”

Over two-thirds of vulnerable clients were receiving benefits, compared with half of those clients without a vulnerability.

Previous research has shown that half of adults in problem debt also have a mental health problem and people with severe mental illness are 2.3 times as likely to experience money or debt issues.

“Among our clients, those who are vulnerable typically show higher levels of financial distress – but that shouldn’t be inevitable," Mr Andrew said.

"While there has been progress, it’s clear that the finance sector, regulators and the debt advice sector could all still do more to help break the link between being vulnerable and being significantly worse off."

Vulnerable clients were significantly more likely than other clients to have a net household income of under £10,000 while 45 per cent of vulnerable clients had less money coming in than going out, even after budgeting advice, compared with 30 per cent of clients as a whole.

The charity said 77 per cent of clients with a terminal illness, and 68 per cent of clients with cancer, cited illness as the main cause of their debt problems.

Among those with mental health issues, 40 per cent said illness was the main reason for their debt. Two in five vulnerable clients overall said that the main reason for them falling into debt was illness