The latest client data report from debt charity, StepChange, showed the cost of living crisis was the fourth most cited reason for getting into financial despair, being brought up by one in nine clients.
With no specific assistance measures targeted at the most financially vulnerable households in the Spring Statement, StepChange expects to see an increase in the proportion of clients whose income won’t be able to meet essential expenditure, which was already at 32 per cent in February.
The Bank of England’s latest Money and Credit data shows consumers borrowed an additional net £1.9bn in consumer credit, of which £1.5bn was new lending on credit cards, which the charity said will be driven by people borrowing to meet essential spending.
Bills are crushing families already with 28 per cent of the charity’s clients finding themselves in arrears on electricity, and 23 per cent were behind on their gas this February. StepChange expects this to worsen after April when the new Ofgem price cap takes effect.
Debts owed to the government, like council tax, also have a massive impact as 39 per cent of the charity’s new clients were in arrears in February. Such debts are typically more aggressively pursued, such as by bailiffs, and are less likely to be able to be rescheduled in a debt repayment plan than consumer credit arrears.
Peter Tutton, head of policy, research and public affairs at StepChange, said: “To fully understand the current household debt landscape requires a wider perspective. More and more, what we are seeing is that people experiencing problem debt have problems meeting not just their credit repayments, but also their priority bills.
“We’re convinced that as the year goes on the chancellor is likely to need to find a way to provide more – and more targeted – support for those who are simply unable to absorb the cost of living increases into their household budgets.
“In the meantime, we urge anyone struggling to make ends meet to seek help from a reputable debt advice organisation at an early stage, rather than turning to potentially more harmful coping strategies such as high-cost credit.”
