County Court Judgements for
Personal Consumer Debt in Lancashire

Introduction

The Office of National Statistics (ONS) has recently published, for the first time, a dataset on unmanaged consumer debt based on County Court Judgements (CCJs) for all districts and middle-layer super output areas (MSOAs) in England and Wales during 2004. A Judgement is the legal name for a record showing that an individual or organisation has been taken to court for the recovery of money. Information is provided on both the number of CCJs and the amount of debt involved. In all cases the figures refer to judgements taken out against individuals for outstanding debts of £1 or more. (Note: debts relating to individual businesses or commercial concerns have been excluded from the dataset). Full downloads of all the data by MSOA for England and Wales are available from the National Statistics website. Data relating specifically to the Lancashire sub-region can be obtained from our Data Download Centre.

CCJs are thought to provide a good indicator of overall patterns of debt at the local level. Information on such indebtedness can be used by policy makers to facilitate the understanding of problems associated with low income, deprivation, poverty and social exclusion. However, it should be recognised that they do not necessarily provide a comprehensive record as obtaining a CCJ against a debtor is only one of the remedies available to those who are owned money. CCJs may also include some people who are able, but who choose not to pay their debt. Moreover, creditors' practices vary and some utilities or businesses may seek CCJs as a remedy more than others who may consider that civil court enforcement is less effective than say, the outsourcing of debt recovery to a third party.

Background

The growth of consumer expenditure has been a key economic driver over recent years helping to underpin a large slice of economic growth. Much of this expenditure has been financed by higher borrowing such that levels of personal consumer debt across the UK have risen to unprecedented levels. It is estimated by Credit Action, a national money education charity, that at the end of June 2006 personal consumer debt stood at more than £1.2 trillion (£1,228bn) spread across cards, mortgages and loans and that it was continuing to rise at the rate of about £10bn per month. Most consumers appear, so far, to have been able to finance such high levels of borrowing as about 80% of the debt is in the form of loans secured against homes such as mortgages and re-mortgages whilst employment rates have been high and interest rates at historically low levels. Such personal debt has not been seen by financial authorities as posing a major issue at the macro-economic level.

However, rising household bills are set to put greater pressure on consumers who have financial difficulties and there is evidence that a number are struggling to repay unsecured loans and debt on their credit cards especially and as borrowing conditions begin to tighten, banks are beginning to see bad debts rise significantly and are accordingly increasing provisions for bad and doubtful debt and beefing up their lending conditions. Individual insolvencies have risen sharply, house re-possessions and personal bankruptcies are up and there has been an increase in individual voluntary arrangements (IVAs) – an alternative to bankruptcy whereby borrowers agree a five-year payment schedule with creditors. Citizen Advice Bureaux too are reporting increasing numbers of people seeking help for debt problems.

Lancashire Results

The profile of County Court Judgements for Personal Consumer Debt across the Lancashire sub-region in 2004 was very similar to the England and Wales average. Over the course of the year nearly 14,400 CCJs were made in Lancashire for personal debt for sums amounting to nearly £29m. These were equivalent to 10.05 CCJs per thousand population, slightly lower than the England and Wales average of 10.42 per thousand population. The average value of CCJs in Lancashire was £2,018, fractionally higher than the national average of £2,005 (Table 1).

By district within the sub-region a more complicated pattern emerges. The number of CCJs ranged from a high of more than 1,840 in Blackpool to just 320 in Ribble Valley, though allowing for the size of the local populations, the highest numbers of CCJs per 1,000 population were recorded in Hyndburn and Burnley and the lowest was in Fylde. In terms of the monetary value of CCJs, at £3.9m this was highest in Blackburn and lowest in Ribble Valley (£894,600) though viewed in terms of the average value, this was by far the highest in South Ribble (£3,355) but, at well under half this sum, lowest in Preston (£1,490). In general, the distribution of CCJs per thousand population and the average value of these between districts shows the expected associations between areas as revealed by the Indices of Multiple Deprivation (IMD, 2007). However, the association at this administrative level is by no means wholly positive suggesting that other factors – possibly more specific components of deprivation such as unemployment or income or factors such as housing status or even age (e.g. size of the student population) might also be affecting patterns in some localities.

Figure 1 County Court Judgements by Value Band, Lancashire and Districts, 2004

Source ONS - County Court Judgements - Personal Consumer Debt, 2004

There appears to be a relatively small variation across the sub-region between districts in terms of the average value of CCJs, ranging from just £1,490 in Preston to £3,360 in South Ribble. In general, the higher sums are associated with higher income areas. Lancashire has nearly 19% of its CCJs in the lower value band (less than £251) compared with the England and Wales average (24%) but rather higher proportions in other bands – nearly a third of CCJs are for sums in excess of £1,000, for example. Only Hyndburn and Pendle have a significantly lower share of their CCJs in the higher value band (Figure 1).

The top and bottom ranked Lancashire MSOAs in terms of the number of CCJs per thousand population are shown in Table 2 whilst Figure 2 presents the distribution of this ratio for MSOAs across the whole of the Lancashire sub-region benchmarked against the England and Wales average. Figure 3 provides a slightly different perspective, indicating the average value of CCJs in each MSOA, again benchmarked against the national average. Unlike the distribution of CCJs across districts where the "averaging effect" meant that the association was much looser, the distribution of MSOAs with high rates of CCJs per thousand population clearly accords closely with known areas of deprivation and low incomes. In terms of the average value of CCJs, high values are more often than not associated with the areas of greater prosperity/higher household incomes though there are several exceptions to this general pattern.

Figure 2 County Court Judgements for Personal Consumer Debt, 2004, CCJs per 1,000 Population

Source ONS - County Court Judgements - Personal Consumer Debt, 2004

Figure 3 County Court Judgements for Personal Consumer Debt, 2004, Average Value of a CCJ

Source ONS - County Court Judgements - Personal Consumer Debt, 2004