Debt advice charity report record number of households ‘struggling to hang on’

By Vicky Shaw, Personal Finance Correspondent18th September 201918th September 2019News EnglandNews England, Poverty / Austerity, Welfare / Benefits, Welfare Reform

A debt advice charity received a record number of cries for help in the first half of 2019 – in signs that more households are “struggling to hang on”.

Some 331,337 people contacted StepChange for help with their debts in the first six months of 2019.

It is the biggest half-yearly total that the charity, which has a 26-year history, has seen.

The charity’s figures suggest single parents and people with mental health problems are particularly likely to feel under pressure.

Of all those who contacted the charity, 190,484 went on to receive full debt advice.

These people had £13,799-worth of non-mortgage debt on average – a 2% increase compared with six months earlier and a 6% increase since 2016.

Nearly a third (31%) of new clients’ outgoings were more than their incomes. The average monthly shortfall for these clients was £365.

Unexpected life events were the biggest causes of problem debt.

Those experiencing a reduction in income (18%), injury or illness (16%) or unemployment or redundancy (16%) made up the bulk of new clients.

StepChange said its figures “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”.

Phil Andrew (pictured), chief executive 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.

He said the figures “must act as a wake-up call to the Government”, with issues around bailiff behaviour and the five-week wait people have before they receive their first Universal Credit payments.

The report also found:

Council tax continues to be the most common arrears type among new StepChange clients and has been so since 2015.
The proportion of new clients responsible for council tax who are in arrears is now at 31%, a slight increase on 2018 (30%). StepChange said council debt is commonly passed to bailiffs, which can increase hardship for struggling households.
In the first half of 2019, 43% of StepChange clients were identified as having an additional vulnerability on top of their financial difficulty.
Nearly half (49%) of clients identified as vulnerable had a mental health issue. Vulnerable clients typically have more than £200 less in income per month than clients generally.
Single parents make up one-quarter of (24%) of those who came to StepChange in the first six months of 2019.
This proportion has risen by a third since 2014, when 18% of new clients were single parents. Nine in 10 (90%) single parent clients were renters. Single parents were also particularly likely to have higher outgoings than incomes.

StepChange said the rapid growth in single-parent clients suggests they are being squeezed by benefits payments and the rising cost of living.

A Government spokeswoman said: “We are determined to help families improve their lives through work, while continuing to support them with the cost of living.

“But we know some families need more support, which is why we spend more than £95 billion a year on working age benefits.

“With Universal Credit, people can get paid urgently if they need it, and 700,000 families will get on average £285 more a month because the system is simpler.”