Oh well done The Guardian

This is something of a turdfest this is. They tell us this today:

As the deadline for tax returns looms, a new report commissioned by the Centre for Economics and Business Research highlights that self-employed people face average debts of 18.6 times their annual income, compared with 4.1 times annual income for those working full or part time.

No, really, no. Your average self-employed person does not owe 18.6 times their annual income. At 5% (about the lowest you\’d get on any form of loan these days) interest that would mean your entire income was paid in interest.

They actually link to their own report about the report that says this:

Self-employed workers are burdened with debt four times greater than those in full- or part-time employment, a leading debt charity has warned.

The self-employed are financially worse off every month, have higher mortgage debts and significantly higher levels of other borrowing such as credit card debt, according to the StepChange debt charity (formerly the CCCS).

In a report commissioned by the Centre for Economics and Business Research (CEBR) using StepChange\’s client database, the charity found self-employed people face average debts of 18.6 times their annual income, compared to 4.1 times annual income for those working full or part time.

So the actual statement is that among those already sufficiently debt burdened to be seeking the aid of a debt charity, self-employed workers have higher debt levels than those in employment.

Which is, I think you\’ll agree, a very, very, different statement.

BTW, the report was commissioned from, not by.

And the report\’ PR puffery itself says:

The precarious position of self-employed people’s finances is highlighted in the report by figures that show the average debt load of a self-employed person coming to the charity is 18.6 times their annual income; this stands in stark contrast to the average debt load of those in full or part-time employment which is just 4.1 times their annual income.

Correct: people coming to the charity, not the self-employed in general.

And the report itself says:

Self-employed struggling: Analysis of the StepChange Debt Charity data warehouse shows the downturn may have hit the self-employed particularly hard. Large mortgages and high levels of secured borrowing, possibly taken out to keep businesses afloat, mean that self-employed people advised by the charity in Q3 owed on average almost £300,000. Poor economic conditions appear to have contributed to gradually worsening financial hardship, with self-employed clients in a deficit budget, spending, on average, £211 more than they earn each month.
StepChange Debt Charity clients in part-time or full-time employment have an average debt load of 4.1 time their income. This rises to 18.6 times income for the self-employed.

Hmm.

So, what is actually being said is that those self employed who turn to a debt management charity have higher debts than those who are employed who turn to a debt management charity.

In other words, small businessmen going bust have debts much greater than their income.

This is a surprise to whom?

But you just watch that statistic thrive out there in the wild. \”The self-employed owe 18 times their annual income\”.

4 thoughts on “Oh well done The Guardian”

  1. Or, to put it another way:
    “Businessmen going bust have bigger debts than wage slaves going bust.”
    or
    “Rich people getting poorer have more debts than people who couldn’t borrow much money in the first place.”
    Who’d a thunk it?

  2. Self-employed income=business profits+notional wage so when revenue goes down and profits turn negative, the self-employed find debt of 2x normal annual income suddenly becomes 20x. That does not mean that they were borrowing silly amounts and recklessly over-geared.
    I am not very operationally geared (and debt-free) but my taxable income fell by nearly 80% in two years post-Lehman.

  3. It could also show that the self employed keep trying to survive even as the debt gets bigger whilst those who are employees give up pretty quickly. This could be because the self employed think that the next big job is around the corner and hold out that little bit more for it whilst the normally employed know that there is going to be no change in their income so give up relatively quickly.

  4. I think John77 has it.
    Self-employed types going bump is usually because work dries up. If your income falls to close to zero overnight (I had a friend who provided high level management training to big corporates and that all died overnight in the crunch), it doesn’t matter if you originally only owed £50 and half a yorkie bar – it still becomes more or infinity*your annual earnings if those earnings are zilch.

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