Increasing number of people struggling with fuel bills, says debt help charity

A debt help charity is seeing growing numbers of people falling behind with fuel bills and a resurgence in the proportion of clients with high-cost credit such as payday loans.

StepChange Debt Charity said the proportion of clients in arrears with council tax is also “stubbornly high”.

In the first half of 2018, 13.1% of all new clients were behind on a gas or electricity bill compared with 11.4% in the first half of 2017.

The charity said the increase coincides with some companies having already raised prices this year.

While some customers could potentially reduce their bills by switching, those facing financial difficulty may be nervous of the complexity of price tariffs and wary of being caught out and put in an even worse financial position, StepChange said.

StepChange wants more utility providers to establish flexible repayment schemes, as well as sharing effective good practice on working with people who are struggling to pay to minimise their costs.

Just over 60% of the charity’s new clients in the first half of 2018 were women. The charity said women make up the majority of single parents contacting it for help.

A total of 326,897 people contacted the charity for help with their debts in the first six months of 2018.

Of the 180,644 who received full debt advice and a recommended debt solution, two-thirds were under 40 – although only one third of the UK population falls into this younger age group, the charity said.

Just 18% of clients were home-owners, against around 62% of the general population.

Around half of StepChange’s clients experienced debt because of job loss, reduced income, or health issues.

In the first half of 2018, more than 30% of new StepChange clients were behind on their council tax – by far the highest category of debt arrears.

Nearly half (48%) of new clients in the first half of the year with council tax arrears had more money going out than coming in.

StepChange said council tax collection practices are “notoriously variable”, with some people being chased aggressively for debts.

Meanwhile, the proportion of new StepChange clients with short-term high-cost credit debt – including payday loans – increased in the first half of the year.

In 2017, 16.8% of new clients had a high-cost short-term debt, but this proportion increased to 18.3% for the first half of 2018. The average payday loan debt was £1,713.

Phil Andrew, chief executive at StepChange Debt Charity, said: “Our clients’ experiences show loud and clear that you’re more likely to get into debt if you are already on a lower income, and that debt problems are often caused by the kinds of life shocks that can happen to anyone – job loss, ill-health or anything else that knocks your income off track.

“We saw some particular worries in the first half of this year in the form of a resurgence in high-cost short-term credit among our clients, more people behind on fuel bills, and a stubbornly high incidence of council tax arrears.

“Council tax is especially concerning in light of mounting evidence that government debt collection practices are lagging far behind best practice.”

In September, the National Audit Office (NAO) estimated that the increased use of public health and housing services by people with problem debt costs taxpayers an additional £248 million a year, and around £900 million a year to the economy as a whole.

The NAO also estimated that people across the UK owe at least £18 billion to utility providers, landlords, housing associations and government, such as through council tax arrears or benefit overpayments.

The watchdog previously said a lack of data-sharing by government departments can result in several debt collection teams competing for repayments from the same person.

Aggressive debt collection can also make the problems of people struggling to pay worse, the NAO said.

Richard Watts, chairman of the Local Government Association (LGA)’s resources board, said: “Councils look to take steps to make sure that people in financial difficulty are supported, whether that’s through signposting to free debt advice, or through the joint council tax protocol, which the LGA has developed alongside Citizens Advice to support those who are struggling.

“No council wants to have to debt collect from its residents, particularly from people on low incomes, but local authorities have a duty to their residents to collect taxes which fund essential services, such as protecting vulnerable children, caring for the elderly, collecting bins, and keeping roads maintained.”

He added: “Anyone who is having trouble paying their council tax or bills should contact their local authority as soon as possible, for financial help and advice, and to discuss the options available.”

A spokesman for Ofgem said: “Ofgem’s safeguard tariff already ensures five million households, including some of the most vulnerable in society, pay a fairer price for their energy and plans to extend price protection to over 11 million more households more at the end of the year.

“Under Ofgem’s rules, suppliers must identify customers who are in or at risk of debt, and engage with them early to put them on manageable repayment plans.”

He said Ofgem is concerned that too many customers who owe money do not get the support they need from suppliers to help pay debt back, adding that the watchdog “will take tough action against any supplier if they fail to treat such customers fairly”.

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