Statistics published today by StepChange Debt Charity show that more than 320,000 people sought help with their debts from the charity in the first six months of 2018.
In total, 326,897 people contacted the charity for help. 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.
Only 18 percent of clients were home-owners, against around 62 percent of the general population. Around half of StepChange’s clients experienced debt because of job loss, reduced income, or health issues.
StepChange said it is seeing “some worrying trends, which should sound alarm bells for local authorities, utility companies, regulators and the government”.
The charity has called for these organisations to “urgently address” the issues that are currently being experienced by increasing numbers of people, it said.
In the first half of 2018, more than 30 percent of new StepChange clients were behind on their council tax – the highest category of debt arrears “by far”, the charity said.
Almost half (48 percent) of new clients in the first half of the year with council tax arrears had a deficit budget – with more money going out than coming in – compared to just 30 percent of the charity’s total number of clients.
There has been increasing focus on local authorities and their approach to debt collection, with growing concerns that they are more likely than most other creditors to pursue debt aggressively.
The National Audit Office recently observed that practice in government debt collection lags behind the private sector as it criticised the “overuse” of bailiffs.
The proportion of StepChange clients with gas and electricity arrears rose. In the first half of 2018, 13.1 percent of all new clients were behind on a gas or electricity bill compared to 11.4 percent in the first half of 2017.
Similarly, the number of people with short term high cost credit debt – including payday loans – increased in the first half of the year. In 2017, 16.8 percent of new clients had a high cost short term debt (a loan with an APR of more than 100 percent due to be repaid within a 12 month period from when it was taken out ), but this rose to 18.3 percent for the first half of 2018.
This rise is despite the FCA-imposed price cap on such loans since 2015 – meaning that the total amount payable in interest, fees and charges cannot be more than the original amount borrowed, and the cost per day cannot be more than 0.8 percent.
Phil Andrew, chief executive of StepChange, 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. Government must reflect on this evidence and ensure that government debt is included in the new statutory debt breathing space scheme. Like the Treasury Committee, we are not convinced that the scheme can be effective if it is not.”