Glasgow’s ‘spiral of debt, poverty’

Glasgow’s ‘spiral of debt, poverty’
By Judith Duffy, The Herald Scotland
13.11.11

About 50,000 people in Glasgow are trapped in a “spiral of debt and poverty” after borrowing from criminal loan sharks and legitimate financial companies charging sky-high interest rates, according to research.

And nearly one in 10 people seeking financial help from a community bank set up to help tackle the problem of loan sharks have revealed they have been forced to go without food.

The figures were uncovered by economics experts at Sheffield University investigating the role of alternative banks, which offer fair-price loans to those without savings and security who struggle to access credit from high-street banks.

In Glasgow, they found the depth of poverty meant “significant” numbers of those seeking assistance from the community bank were being forced to go without food for themselves or their children. Charities have warned the problem is becoming more common across Scotland as people already living on the breadline struggle to make ends meet amid the economic crisis and cuts to public funding.

The research is published in a book entitled Financial Exclusion And The Poverty Trap, Overcoming Deprivation In The Inner City, which examines social enterprise banks in four cities across the UK, including Scotcash in Glasgow.

Paul Mosley, professor of economics at Sheffield University, said the number of people using the service who struggled to buy food in the previous week was far higher in Scotland than in other areas.

“In other cities outside of Glasgow the figure was 1% to 2%,” he said. “In other words, there were some people whose poverty was so bad they were also in food poverty and sometimes didn’t have enough food to give to the children to eat. But in Glasgow the proportion was something like 10%.”

Mosley said the findings supported suggestions that areas of Glasgow suffered a depth of poverty that “you don’t encounter in other parts of the UK”.

The latest annual report from Glasgow’s social enterprise bank Scotcash, which was launched in 2007, showed it had nearly 8000 enquiries in three years and handed out more than 7000 individual loans.

Mosley, who is director of a Yorkshire-based social enterprise bank, said such banks and credit unions could help by plugging the gap many low-income households face in accessing credit, which loan sharks are able to exploit. 

“There is little doubt the majority of clients [of social enterprise banks] have been helped to weather the financial storms of the last years and some of them have made a decisive leap out of poverty and out of dependence on loan sharks,” he said.

Charities said the statistics on food poverty revealed by the research were not surprising.

Susan McPhee, head of policy at Citizens Advice Scotland, said: “We would recognise these sorts of trends as applying to the whole of Scotland. The impact of the recession continues to devastate whole communities across the country.

“With prices rising and incomes falling, it is very clear people will find it hard to make ends meet – particularly those who were living on the breadline to begin with.

“Many of the clients we see at the Citizens Advice Bureau have told us they are struggling so much they have gone without food or fuel. That is not an unusual thing for our advisers to hear.”

Later this month, a food bank service – which doles out free food to the needy – will be launched in Glasgow by The Trussell Trust. It is a Christian anti-poverty charity that has highlighted concerns over the impact of increasing food and fuel costs this winter.

Audrey Flannagan, project manager of Glasgow South East Food Bank, said the service had already helped some people ahead of opening, including a single-parent family and a young man who had his Disability Living Allowance cut.

She added: “By Christmas time and after Christmas, when benefit cuts start to come through, there will be many more people needing help.”

Peter Kelly, director of the Scottish Poverty Alliance, also warned many people were struggling under increasing financial pressure.

“We are finding this is a problem not just in Scotland and the UK, it is something happening right across Europe,” he said.

“People who have never been reliant on the state or using benefits suddenly find themselves in a position where they are needing to turn to food banks to make ends meet.

“Our welfare system is going through a period over the next few years of profound change. We are going to see benefits essentially not keeping pace with prices in the real economy. These are problems that are likely to get worse.”