Britain's debt nightmare: Report paints picture of low income Britons pushed to the limit

The Institute for Fiscal Studies says one in four of Britain's poorest borrowers falling behind with repayments

Britons' poorest borrowers are struggling with their debts (PA)

As post Christmas bills pour in, making January the worst month of the year for Britain's poorest, the Institute for Fiscal Studies (IFS) has released a timely report highlighting the scale of their struggles.

Funded by the Joseph Rowntree Foundation, it is filled with numbers that ought to worry anyone with a conscience. Hundreds of thousands, and perhaps millions of people, are being pushed to the limit.

For example, a quarter of the poorest Britons are falling behind with repayments, and two thirds of them have assets worth less than half of their debts.

Once they are in debt, people on low incomes tend to stay there. Half of the bottom 20 per cent of earners who fall into arrears are likely to be in the same position two years later. They become trapped in a cycle that is devilishly hard to break out of, all the more so as the squeeze on household budgets continues.

The IFS argues that the scary looking number for Britons’ total unsecured debt - £200bn according to the Bank of England - is less important and less scary than it looks. That’s because 60 per cent of it is held by higher earners and most of them have assets - savings accounts and the like - which they can call on to fund repayments if things get tight.

It's those who aren't in that fortunate position whom it highlights as a cause for concern.

Although I’d still argue that that £200bn is of sufficient size that the Bank is correct to be nervous, particularly given the current risks to the UK economy (hello Brexit), this is a sensible conclusion to draw. The Financial Services Authority appears to have been thinking along similar lines if you consider the focus of the recent work it has conducted on unsecured debt; credit cards, overdrafts, personal loans and the like.

What should never be forgotten is that behind the report's many numbers lies a tide of human misery, of people reliant on food banks, struggling to put clothes on their children, borrowing to ensure they have at least some form of Christmas, and losing sleep as the bills roll in.

This too often gets lost amid coldly rational academic analysis. It is understood intellectually by researchers and policymakers, and by the controlling brains at the FCA and the Bank, for example, but they don’t always have a good feel for the dilemmas faced by households feeling the squeeze because vanishingly few of them have ever been in that position.

Vanishingly few of them have felt the pressure of living from pay cheque to pay cheque while trying to keep an ever increasing number of plates spinning. Perhaps that’s something they might care to consider when they next look at recruitment.

In the meantime the IFS sums up with a call for, you've guessed it, yet more research, for example, to understand more deeply “why households take on new debt” and don't use the assets they have to pay it down. That one’s actually rather easy: they hope something will turn up to bail them out in future. It almost never does. But the power of prayer, or of lottery tickets, can be terribly seductive when you’re in a jam.