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Newcastle to Stockton: Drowning in debt

22 June 2013

Shona Alexander at the CAB

Into day five of the Austerity Uncovered tour and we’re visiting the North East – Newcastle, Sunderland and Stockton. Starting the day in Newcastle, we’re invited into the city’s Citizens’ Advice Bureau, where we meet chief executive Shona Alexander. The CAB is located not far from Grey’s Monument, where the TUC bus is parked up, talking to local people.

Shona tells us that like so many of the voluntary sector organisations we’ve seen so far, the CAB is facing huge problems in finding enough funding to meet the rising need that they’re seeing in Newcastle. They’ve lost most legal aid funding for starters, which limits how much they’re able to take people’s cases up.

They’ve also stopped opening on Saturdays. There wasn’t much point any more, as the other agencies that they were generally referring people on to have also closed their weekend operations due to lack of funds.  The regular funding they had been used to is evaporating and they’re having to look elsewhere for money, which brings with it its own problems.

For example, there’s significant money available through the National Lottery Transition Fund, but this needs to be tied to innovation. The CAB found it easy to get money to set up a new support project in the Newcastle suburb of Byker, but once the project had developed enough and been proven to work, the established project was no longer ‘innovative’ enough for funding to continue, and residents lost much of the benefit that they’d started to make real use of.

The problem here is that you need to be in regular enough contact to build people’s confidence in coming to you. Short-term interventions aren’t good enough when people seem to be retreating into the communities that they know and trust, and are less likely to make the often expensive trip to town (public transport is far from cheap here) and risk the stigma of attending a large advice centre rather than a more discreet project in their own community.

The Newcastle CAB has 85 dedicated volunteers, each bringing with them unique skills and perspectives. It’s an amazing resource, but one that certainly doesn’t come for free, despite the public image of the Big Society. Volunteers are expensive. They need training and resourcing if they’re to do their jobs well, with proper facilities, and this is getting harder and harder to afford.

Welfare advice is the major issue with clients in Newcastle, as the benefits system has changed so fundamentally, and people receiving benefits have had to deal with such punitive cuts to their incomes. Also high on the CAB’s agenda though is the risk of debt, through pay day lenders or illegal loan sharks.

If you find yourself in trouble financially there’s always cash available to you. The problem is that it’s very rarely the right option to take. Loan sharks operating in local communities are on the increase. The CAB are seeing this right across the city but have focused particularly on Byker where they’re currently finding a lot of cases.

It’s a guy on a street corner who makes it their business to know everyone in the community. They know when you get your pay or benefits in, how your circumstances might be changing and when you’re likely to be short. A quick deal with them and one of their mates pops round in a car with an envelope of cash. They operate outside the law, and anonymously, so it’s hard to track them down and for groups like the CAB to talk to them about cases, and as a borrower you can’t afford fall foul of them as their huge interest rates are backed up by the threat of violence.

Going hand-in-hand with the rise of illegal loans is the growth of pay-day lending firms – either online or through shops, which are springing up everywhere these days. This kind of lending is legal and regulated but Shona worries the two are very much a connected phenomenon. They use very slick marketing to give the impression this is something easy to work with and something everyone is doing so you might as well too.

Once you get onto this slide though, it gets hard to stop. The interest rates are hiked up so that what is only a very short-term loan can cost a significant amount to pay back, particularly if you’re doing this regularly as you find shortfalls in what you need to get by every month. There’s a regular pattern the CAB are seeing now. People just don’t have the money coming in that they need so they start to get loans from a lending shop. Every time they do this they’re paying back more and the debt is growing and growing. Eventually they can’t pay back the loans and in desperation they turn to the sharks.

The problem might be less severe if the legal pay-day lenders were sticking to the policies they are supposed to, making more checks on whether vulnerable people can pay loans back and being much clearer about the terms of their loans. Service users often report that they’ve had surprises that they’d not been warned about, or the CAB find people who obviously should never have been given the loan. They spend a lot of time representing their clients to the lenders, and getting things sorted out for them, in cases that shouldn’t have had to arise.

Particularly hard is the frequency that they’re now reading local media reports of suicides – people that they had had contact with deciding to end their own lives, as they can no longer see a way out of their situation. When a tragedy like this happens with one of their clients, as it has several times over the last year, it’s also extremely distressing to the volunteers who had been trying to sort something for that person.

The risk is becoming such a concern that they have developed relationships with the Samaritans and they now make sure that any mention of suicide in their advice sessions gets discussed in full with clients, with appropriate advice, as it could well develop into a real threat.

Sunderland community cafe

At a community centre run by the Salvation Army in Southwick, Sunderland, we hear more of the same from local organisers and mums using the centre’s community cafe. The centre is a real focus for the local area with 50 kids attending the breakfast club before school and more coming back for the after school club. Kids love the clubs but they also give parents a chance to informally meet and talk through any problems with the centre’s advisors and other services provided by Southwick Community Forum. One mum tells us the clubs are great – without them many kids would be going to school without breakfast.

But funding is proving harder and harder to find. The Community Forum were even about to fold earlier this year until the Salvation Army stepped in to offer them a free office at the centre. Even so things are hard and organiser Keith and his colleague have been working on half wages for three months to have the money to keep providing services. Finding money from anywhere he can is now taking up much of Keith’s time. He’s not willing to let it go though as he sees the need for what they’re doing.

Keith has lived in the area since he was young and remembers Southwick Green when it used to be a great local shopping centre, with a butcher, greengrocer and other independent shops. Now it’s a pay-day lender, a bookies, and a cash-for-clothes shop where you can get a small payment on a bin bag of your old clothes. One of the mums tells us she knows plenty of local people who’ve been using the lender to get past difficult times lately: “you get £100, but you have to give them back £150″.

Keith says it’s hard to advise people who are at risk of falling into the clutches of the local illegal lenders. People are scared to report that they’re in debt trouble and doubly so if they’re involved with the criminal loan sharks and want to protect their families from reprisals.

Stockton town centre

We end the day in Stockton-on-Tees town centre to get the thoughts of people out doing their shopping. But it soon becomes apparent there aren’t many of them about today. This isn’t new says council leader Bob Cooke. Shops have folded in the high street over the last couple of years, and when they go chances are they’re replaced by pay-day lenders, pawnbrokers or bookies. A quick scan round and we can see what he means. The garishly coloured shop fronts are very obvious.

Bookies and lenders always do well in bad times, Bob says. People are looking for any escape route they can find. With the Stockton town centre ward one of Britain’s poorest areas there’s no shortage of people needing a route out of their problems.

There’s very little the council can do to stop predatory lending either. The government has relaxed planning laws which makes it much harder for the council to challenge change of use when a shop building becomes free. And as they spread they are killing off the rest of the retailers in town, making the town centre a far less attractive place for people to come and spend what money they do have.

Bob and his colleagues are trying to work around the problem though. They’re not able to stop the lenders, but they don’t have to like it, and they are offering rate rebates to make it easier for the retailers that they want to open up instead. They’re also doing more to develop public space in the town centre – construction is underway at the moment – so that people will stay on and so they can host markets and events. And Bob’s particularly proud of their Enterprise Emporium which is a kind of incubator for independent shops. The building houses four retail units, which are offered on very low rates, and with mentoring support for local people who want to test out an idea they’ve had for a business. A scooter and BMX shop has done well there recently and is now ready to move out into a high street shop.

With the pay-day shops employing few staff, and the large sums of money they make not staying in the community, this is welcome news, but as in Newcastle and Sunderland Bob and the people of Stockton have an uphill battle on their hands to reclaim their town from debt.

17 June - 29 June


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