Household energy debt has tripled in the last decade

The number of customers falling behind on their electricity bills with no repayment plan in place has more than tripled from 300,000 in 2012 to over one million at the end of 2024, with the number of customers falling behind on their gas bill also tripling from 300,000 to 900,000 over this period according to latets Resolution Foundation research.

The report notes that the 13 million working-age families across the poorer half of Britain still struggle to save, with over two-in-five having less than £1,000 in liquid savings. But saving rates are at least going in the right direction – a third of poorer households (33 per cent) said they had money to save at the end of the week or month in 2018-20, up from just a fifth (20 per cent) in 2006-08.

Overall levels of consumer debt among the poorer half of families have also dropped since the financial crash. The average amount owed by all these families has fallen from £2,617 in 2006-08 to £2,256 in 2020-22 (in today’s prices) – a real-terms fall of 14 per cent.

The authors note that while this fall in consumer debt is not as big as the 21 per cent fall among higher-income households over the same period, it is still encouraging, especially in the context of the shift to car finance in the last decade.

But while levels of consumer debt have fallen, other problem debts, like falling behind on ‘priority’ household bills such as energy and Council Tax – where the consequence for not paying can be severe – have increased dramatically.

Since the eve of the pandemic, Council Tax arrears in England have risen by almost half, from £4.6 billion in 2019-20 to £6.7 billion in 2024-25 (in today’s prices). The penalty for accruing these arrears can be sharp too – including prison sentences of up to three months.

The rise of energy arrears has been even sharper. Close to a million electricity and a million gas customers are now behind on their bills, and the size of their debts has surged: between 2012 and 2024 the average electricity debt grew from £500 to £1,600, while the average debt for gas rose from £500 to nearly £1,400.

These debts remain most concentrated in the poorest fifth of the income distribution, where almost one-in-five families (18 per cent) are behind on at least one priority bill.

The rise in arrears is principally driven by the increase in the bills themselves, say the authors, Families are still paying 50 per cent more for each unit of gas they use than they were before the energy crisis, while the combination of dwindling Council Tax support and fast-rising Council Tax bills has increased its burden on the poorest households.

The report says policy makers need to respond to these trends. Improving Council Tax support and introducing a new ‘social tariff’ on energy bills targeted at poorer households would help address the ongoing accrual of debts, while relief and recovery on energy arrears will require careful oversight from Ofgem.

Finally, the Foundation says that the Government’s pensions commission offers an opportunity to further boost family savings, by introducing an auto-enrolled sidecar saving scheme alongside their pensions.

Felicia Odamtten, Economist at the Resolution Foundation, said “Families’ financial resilience has been tested in recent decades by a series of financial shocks along with stagnating incomes.

“While families have impressively still managed to reduce their credit card debt and save a bit more, new financial worries have emerged with arrears on priority bills skyrocketing.

“Tackling these financial problems will require additional help with priority bills, such as improved Council Tax support, and a social tariff on energy bills. But all too often, lack of financial resilience is simply a consequence of lack of income and addressing this will mean fixing Britain’s dire record on productivity and real wage growth.”

Simon Trevethick, Head of Communications at StepChange, reacting to the research, said “This research speaks to what our advisors see on a daily basis – that the sheer weight of everyday costs is pushing households to the brink. We know that the cost of living has made the prospect of saving for a rainy day increasingly difficult – our polling found four in ten UK adults (22 million) would not be able to meet all of an unexpected £1,000 expense without borrowing.

“With over two in five StepChange clients in energy arrears, averaging over £2,300, this is one of the most pressing issues they face. For council tax, we see increased levels of harm as the risk of debt escalation and outdated threat of imprisonment loom large over those in difficulty – with average debts topping £2,000.

“There are practical steps consumers can take – fixing your energy tariff ahead of the price cap changes coming into effect, reducing energy usage on a daily basis if it’s safe for you to do so, and reaching out to your energy provider, local authority or a free debt advice provider if you fall into difficulty or arrears.

“But these are sticking plaster measures for a much deeper wound that demands action from central Government. We need to see a debt relief scheme to address historic energy arrears, a fundamental overhaul of council tax regulations – including the end to imprisonment rules – and immediate action from government to build household financial resilience.”