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StepChange reveals record number seeking debt advice

Charity warns rising number of households are vulnerable to future economic turbulence and urges government to prioritise preventing household debt in upcoming Queen’s Speech

18 September 2019

New statistics published today paint a bleak picture of the scale of problem debt in the UK, revealing a record 331,337 people contacted StepChange for help with their debts in the first six months of 2019.

The charity’s latest Statistics Mid-Year Update reveals that of the 190,484 [see notes to editors] new StepChange clients who received full debt advice, the average level of unsecured personal debt was £13,799. This represents a rise of 2% in the past six months and 6% since 2016.

Meanwhile around a third (31%) of new clients’ outgoings were more than their incomes - the average monthly shortfall for clients with deficit budgets is an alarming £365.

The figures also reveal that unexpected life events are the three biggest causes of problem debt, with those experiencing a reduction in income (18%), injury or illness (16%) or unemployment or redundancy (16%), making up the bulk of new clients.

These key indicators underline the growing number of households in the United Kingdom struggling to keep their heads above water, particularly when faced with a sudden change in personal circumstances.

This should sound alarm bells for the Government, local authorities and regulators - any future economic turbulence or sharp rises in the cost of living could spell disaster for those already living on a knife edge.

Phil Andrew, CEO of StepChange Debt Charity, said:

“These statistics provide a sobering assessment of the scale of problem debt in this country. Across the board we are seeing red flags, including worrying proportions of new clients falling into debt due to reduced income, illness or because they rely on credit to pay for day-to-day living expenses.

“Clearly more and more households are struggling to hang on and are ill-equipped to deal with any economic shocks the future may hold.

“These figures must act as a wake-up call to the Government, who have a real opportunity to tackle some of the drivers of debt in the upcoming Queen’s Speech and beyond. By taking concerted action to curb unlawful bailiff behaviour and waking up to the impact the five-week wait for Universal Credit is having on those who have experienced a sudden drop in income, it can go some way to stemming the rising tide of those in problem debt.”

Further findings from the report underline the pressing need to tackle a range of issues driving problem debt in the UK

Council tax arrears

Council tax continues to be the most common arrears type among new StepChange clients and has been so since 2015, when the national scheme of Council Tax Benefit was removed. The proportion of new clients responsible for council tax who are in arrears is now at 31%, a slight increase on 2018 (30%).

This is particularly worrying given that council debt is commonly passed to bailiffs – an expensive and intrusive form of enforcement that can increase hardship for struggling households. With government reviews on bailiff reform and council tax debt collection still unresolved the need for change is pressing.

The Government must move ensure the bailiff industry is independently regulated as soon as possible, alongside creating a single, free accessible bailiff complaints procedure. These vital measures, as well as a review of bailiff fees and the introduction of affordable repayment plans, will go some way towards creating the fair and consistent approach that people need to get through a debt crisis.

Vulnerabilities

Debt can have a serious impact on anybody’s life, but for people who have vulnerabilities [see notes to editors], such as physical or mental health problems, it can be even more severe. In the first half of 2019, 43% of StepChange clients were identified as having an additional vulnerability on top of their financial difficulty, while half of clients (49%) identified as vulnerable have a mental health issue.

Vulnerable clients have an average monthly income of £1,276, more than £200 lower than the average for all clients (£1,518), while they are also more likely to be behind on their household bills. In order to protect those in vulnerable positions we need to see creditors work to identify potential vulnerabilities at as an early a stage as possible to prevent these arrears or debts from spiralling.

For those who fall ill and need to rely on welfare, the current five-week wait for Universal Credit can hit at a time when support is needed the most. The Government must remove the need for bridging loans, in the short term by turning Advance Payments into non-repayable grants, and in the long term by ending the five-week wait.

Single Parents

Single parents remain overrepresented among our clients compared to the general population. They make up one quarter of (24%) of those who came to us in the first six months of 2019, a disproportionately high figure given just 6% of the general population fall into this bracket. This proportion has risen by a third since 2014, when 18% of new clients were single parents.

Elsewhere it’s notable that a higher proportion of single parents (34%) had outgoings that were more than their incomes compared to the average of 31%, while the overwhelming majority are renters (90%). That single parents are the most rapidly increasing group among our clients shows they are being squeezed by factors including the benefits freeze and the rising cost of living.

Notes to Editors

  1. The correct web addresses for the main debt advice charities are www.stepchange.org, www.nationaldebtline.org and www.citizensadvice.org.uk – beware of any domain names that are similar but non-identical.
  2. For our clients, other vulnerabilities include physical health issues, learning disabilities, hearing difficulties, sight loss or impairment or any other condition which makes dealing with debt problems additionally challenging