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More clients cite cost of living as reason for debt, says StepChange

29 March, 2022

StepChange Debt Charity’s latest client data report for February shows a rise in the proportion of people seeking advice who say that cost of living pressure is a reason for their debt. The cost of living was the fourth most common reason last month, cited by around one in nine clients.

The Bank of England’s latest Money and Credit data out today shows consumers borrowed an additional net £1.9 billion in consumer credit, of which £1.5 billion was new lending on credit cards, which will in part be driven by people borrowing to meet essential spending. Yet consumer credit is only one part of the debt picture.

For example, among clients with a responsibility for paying utility bills, in February 28% were in arrears on their electricity and 23% on their gas – a situation that StepChange expects to see worsening especially after April when the new higher price cap takes effect.

Debts owed to Government - such as Council Tax – also feature heavily. 39% of new clients who have a payment responsibility were in arrears at the time they sought advice in February. Such debts are typically more aggressively pursued, including potentially by bailiffs, and less likely to be able to be rescheduled in a debt repayment plan than consumer credit arrears.

Given the lack of any further specific assistance measures targeted at the most financially vulnerable households in the Spring Statement last week, StepChange expects to see an increase in the proportion of clients with a negative budget (where income is insufficient to meet even essential expenditure), already at nearly a third (32%) in February.

StepChange head of policy, research and public affairs Peter Tutton said:

“While watching what is going on in the consumer credit market is important, to fully understand the current household debt landscape requires a wider perspective. More and more, what we are seeing is that people experiencing problem debt have problems meeting not just their credit repayments, but also their priority bills.

“We’re convinced that as the year goes on the Chancellor is likely to need to find a way to provide more, and more targeted, support for those who are simply unable to absorb the cost of living increases into their household budgets. In the meantime, we urge anyone struggling to make ends meet to seek help from a reputable debt advice organisation at an early stage, rather than turning to potentially more harmful coping strategies such as high-cost credit.”

Notes to editors

  1. StepChange’s latest client data report for February can be found here
  2. The Bank of England’s Money and Credit data can be found here

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