“Sobering” problem debt stats should be “wake-up call” for government

Debt charity StepChange’s Mid-Year-Update shows that “more and more households are ill-equipped to deal with future economic shocks” with a record 331,337 people asking for their help

More households than ever are “ill-equipped to deal with future economic shocks” say StepChange after releasing “sobering” stats that show a record number of people contacted them for help this year.

The debt charity revealed that 331,337 people have asked for help with problem debt this year, but that is only one of the figures that should be a “wake-up call” for the government.

Their Mid-Year Update found that 190,484 new clients turned to the charity in desperate need of help while the average level of unsecured personal debt sat at £13,799 – both of these figures have increased by two per cent in the last six months.

Council tax arrears remain the most common issue among new clients, which has been the case since 2015 when the national scheme of council tax benefit was removed. The proportion of people in getting in touch for help has increased slightly to 31 per cent with StepChange citing the number of debts passed on to bailiffs as a concern.

Last week, the Money Advice Trust revealed that 2.6 million debts were passed on to debt collectors by local authorities.

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StepChange is urging the government to press on with reviews on bailiff reform and council tax debt collection as well as calling for an independent regulator and the introduction of affordable repayment plans to curb the debt crisis.

They also want the government to take action to protect vulnerable people on Universal Credit by removing the need for bridging loans and turning advance payments into non-repayable grants with the end goal of ending the five-week wait for a first payment.

These calls come after StepChange reported 43 per cent of their clients had an additional vulnerability on top of their financial difficulty while half of those identified as vulnerable had a mental health issue.

Vulnerable people also have an average monthly income of £1,276 – £200 lower than the average for all clients. And for a third of the charity’s new clients, that income didn’t stretch far enough to meet outgoings with an average deficit of £365.

This makes them particularly at risk of unexpected life events – StepChange’s report found a reduction in income (18 per cent), injury or illness (16 per cent) or unemployment or redundancy (16 per cent) as being the bulk of their new clients turning to the charity.

“These statistics provide a sobering assessment of the scale of problem debt in this country,” said Phil Andrew, CEO of StepChange.

“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.”

A government spokeswoman pointed to the £95 billion per year spent on working age benefits and Universal Credit tweaks as helping those in debt. She said: “We are determined to help families improve their lives through work, while continuing to support them with the cost of living.”