Council tax and energy bill hikes fuel problem debt
In the first six months of 2018, debt charity StepChange reported that 30% of new clients were behind on council tax – the biggest category of arrears.
It found that 50% of these people had a budget deficit, with more money going out than coming in.
But with local authorities often pursuing debt aggressively with the overuse of bailiffs and with poor practice widespread, the charity urges for more humane alternatives.
The charity has also seen a rise in people coming to it for advice after falling behind on utility bills.
In the first half of the year, 13.1% of all new clients were behind on gas and electricity bills, up from the 11.4% in the previous year.
It said the rise could be due to recent price hikes, with some companies hiking tariffs twice this year already.
While energy switching may be an option for many, for others, they’re worried they may be caught out and face greater financial difficulty.
Another area of concern relates to the use of short-term high credit debt, including payday loans.
Last year, 16.8% of those who came to StepChange had a high-cost short-term debt with a loan attracting an APR of more than 100% due to be repaid within a 12-month period. But this number rose to 18.3% for the first six months of 2018.
It added that 29% of those it helped were aged under 25.
While a price cap on these loans was introduced in 2015, StepChange said this “helped reduce the worst harm caused”, but “far from eradicated the problems”.
In total, nearly 327,000 people contacted the charity for help with their debts in the first six months of 2018, with the majority of those who received full debt advice being under the age of 40.
Phil Andrew, CEO at StepChange, said: “We saw some particular worries in the first half of this year in the form of a resurgence in high-cost, short-term credit among our clients, more people behind on fuel bills, and a stubbornly high incidence of council tax arrears. Council tax is especially concerning in light of mounting evidence that government debt collection practices are lagging far behind best practice.”