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Consumer Credit Essential diffi culties
Scottish report fi nds that average arrears on essential bills increased by 29% in one year
Sharon Bell Head,
StepChange Scotland
Our new fi gures paint a worrying picture of its client fi nances in 2021, with client average arrears on essential bills increasing by 29% from £2,302 in 2020 to £2,961 in 2021. In 2021, we helped over 28,600 clients
with debt advice, and 8,433 went through a full debt advice process, with a growing proportion of clients citing the cost of living as a reason for debt, according to the charity’s latest Scotland in the Red update.
Average debt levels Emerging from the pandemic, average client unsecured debt levels fell slightly in 2021, but average arrears on essential bills rose dramatically, increasing from £2,302 in 2020 to £2,961 in 2021. This potentially refl ects a transition from
the Covid phenomenon of 2020 when many clients were using credit to cover their essentials, an option that may now have been exhausted.
Additional vulnerability The proportion of clients with an additional vulnerability also increased sharply, to a high of 54% of all clients, up from 48% in 2020. Worryingly, their arrears situation was also worse. Vulnerability may be increased due to
factors such as physical-health conditions, mental-health conditions, learning disabilities, sight or hearing diffi culties. These clients face greater complexity in
addressing problem debt with data showing that 52% of vulnerable clients were at risk of losing their home, and 75% were in arrears with electricity bills, even before the energy price cap rise this year. For many years women have been overrepresented among our clients and
24 The former, which has a current emergency
The proportion of clients with an additional vulnerability also increased sharply, to a high of 54% of all clients, up from 48% in 2020. Worryingly, their arrears situation was also worse
last year saw a further two percentage point increase in the proportion of women contacting the charity from 58% in 2020 to 60% in 2021. Nearly two-thirds (63%) of vulnerable clients were women.
Council Tax Council Tax continues to be the most common household bill for clients to be struggling with, with 39% of those clients with a liability to pay (and 44% of vulnerable clients), in arrears. For the second year in a row, the overall
proportion of tenants rose, as did the proportion of tenants in arrears and the average value of rent arrears. Two in fi ve clients (42%) were at risk of losing their homes due to arrears on their housing costs. In the light of these trends, we are calling
on the Scottish Government and Local Authorities to commit to additional support which will help the most fi nancially vulnerable households. We are recommending that measures are
made permanent that were implemented during the pandemic such as the Moratorium Extension and the Tenant Support Hardship Grant.
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provision of six months, has allowed clients to fi nd new employment, get a debt solution in place or maximise their income through welfare. This support should also involve looking
again at the £150 Council Tax Rebate, which it says is not fi t for purpose in off ering support to people who are in arrears on their Council Tax. For those who are in arrears on Council Tax or rent, local authorities need to implement fair treatment by ensuring debts are collected at an aff ordable rate and enforcement practices do not push households into further fi nancial diffi culty.
Struggling to pay It is clear from analysing our clients’ fi nances that households were already struggling to pay for essential bills for much of last year. The sharp rise in the cost of living that we are currently seeing risks triggering a landslide of problem debt for people in Scotland. We are especially concerned to see so many
of our vulnerable clients face the prospect of losing their home and being presented with more unaff ordable price hikes in energy bills and Council Tax. Our recommendations to the Scottish
Government and local authorities, if actioned, would help to protect households from the huge leap in the rate of infl ation we are experiencing. We have seen the Scottish Government uprating certain support in line with current infl ation, a step that we think the UK Government should also be taking to the full range of benefi ts across all nations. Yet there also remains more that the Scottish Government can and should do to help mitigate the worst eff ects of the cost of living crisis, both in terms of targeted support and improvements in public sector debt collection practices. CCR
May 2022
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