Average arrears on essential bills increased by 29% in one year – StepChange Scotland

New figures from StepChange Debt Charity Scotland paint a worrying picture of its client finances in 2021, with client average arrears on essential bills increasing by 29% from £2,302 in 2020 to £2,961 in 2021. 

In 2021, StepChange Debt Charity Scotland 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.

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 reflects 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.

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 difficulties. 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 StepChange clients and 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 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 five clients (42%) were at risk of losing their homes due to arrears on their housing costs.

In the light of these trends, StepChange Scotland is calling on the Scottish Government and Local Authorities to commit to additional support which will help the most financially vulnerable households. It is recommending that measures are made permanent that were implemented during the pandemic such as the Moratorium Extension and the Tenant Support Hardship Grant. The former, which has a current emergency provision of six months, has allowed clients to find new employment, get a debt solution in place or maximise their income through welfare. 

The charity suggests this support should also involve looking again at the £150 Council Tax Rebate, which it says is not fit for purpose in offering support to people who are in arrears on their Council Tax. For those who are in arrears on Council Tax or rent, StepChange says local authorities need to implement fair treatment by ensuring debts are collected at an affordable rate and enforcement practices do not push households into further financial difficulty.

Sharon Bell, head of StepChange Scotland, said: “It’s clear from analysing our clients’ finances 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’re currently seeing risks triggering a landslide of problem debt for people in Scotland.

“We’re especially concerned to see so many of our vulnerable clients face the prospect of losing their home and being presented with more unaffordable 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 inflation we’re experiencing.

“We’ve seen the Scottish Government uprating certain support in line with current inflation, a step that we think the UK Government should also be taking to the full range of benefits across all nations.

“Yet there also remains more that the Scottish Government can and should do to help mitigate the worst effects of the cost of living crisis, both in terms of targeted support and improvements in public sector debt collection practices.”

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