Credit, collections & insolvency news
One in eight (12%), around six million people, have borrowed money to make ends meet in the last 12 months according to research by StepChange.
The debt charity is urging the government to reassess its cost of living support for households ahead of the Spring Budget as new polling finds that two in five (40%), 21 million people, are finding it difficult to keep up with household bills and credit commitments, up from one in three (34%) in September 2023 – an increase of 3.5 million people in just four months are struggling to keep up with bills and credit commitments, and six million have relied on credit to make ends meet in the last 12 months.
The resarch also found that one in four (24%) have rationed heating, electricity or water to meet credit repayments in the last 12 months, up from one in five (21%) in September 2023
People were also asked about their ability to cope should they be faced with an unexpected expense of £1,000. One in eight (12%) people said they would not be able to cover any without turning to borrowing, rising to one in five (19%) among single parents.
StepChange, alongside other charities, has raised the alarm about the Household Support Fund ending in March, which is a vital lifeline for households experiencing financial hardship, particularly if they are faced with an unexpected expense, or are struggling to cover essentials.
Elsewhere, while encouraging reports have emerged around energy bills dropping from April, energy prices remain significantly higher than two years ago, and according to estimations from Ofgem, energy debt has reached a record £2.9 billion. StepChange has seen a similar trend of high energy debt among its own clients – between January and December 2023, average energy arrears increased by 28% per new StepChange client.
StepChange says the Spring Budget on the 6th March is an opportunity for government to extend targeted support for low income households whose financial resilience has been eroded by two years of the cost of living crisis.
Vikki Brownridge, CEO at StepChange Debt Charity, said “In an election year, tackling such widespread problem debt and improving households’ financial security should be at the top of the agenda for current and potential new governments. We’re fast approaching a point where all measures brought in to support people with the cost of living crisis are due to end, yet as this research shows, managing the cost of essentials has become more difficult for people in recent months.
“We were disappointed the government has not taken forward the introduction of a social tariff in energy as we continue to see first-hand the pressure that high energy bills have put on our clients over the past two years. To give low-income households a chance of building up any financial resilience this year, we’d like to see energy debt written off for those who cannot afford to pay.
“Extending the Household Support Fund, the localised pot aimed to help households facing financial hardship, would also be a crucial step to arrest the alarming slide in many households’ ability to cope with financial setbacks.”
Commenting on the findings, Alastair Douglas, CEO of TotallyMoney said “Millions of people are unable to warm their homes, fill their fridges, or keep up with credit commitments. And with government support lacking, people are turning to credit to plug the gap and cover the essentials.
“The worry is that as demand is growing, so is caution from the banks. They’re restricting who they’re lending to, creating a credit crunch for would-be borrowers. As a result, we’ve seen a boom in unregulated Buy Now Pay later borrowing, and 2.6 million low income households have turned to high cost or illegal money lenders.
“And while inflation may have dropped from its 11.1% peak, it’s still double the Bank of England’s target. The cost of living isn’t getting any cheaper — it’s still on the rise — and without action, people will continue to struggle for years to come.”