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Households struggle with smaller debts on everyday bills

Written by: Paloma Kubiak
Demand for debt advice is on the rise as people struggle with ‘smaller but trickier’ arrears on everyday household bills.

Debt problems have changed in the decade since the financial crisis with many people struggling to repay debt of £5,000 or less.

According to National Debtline, run by the Money Advice Trust, fewer people are seeking advice on credit cards, loans or overdrafts. Instead, 50% of callers grapple to repay ‘smaller but trickier’ debts such as council tax, rent and energy. This figure is up from 22% recorded in 2008.

As part of its ‘A decade in debt’ report, the charity revealed that 30% of callers have council tax arrears, up from 15% in 2008. Those with rent arrears has increased from 6% to 17%, while those struggling to repay energy bills has risen from 9% to 14% in the same period.

Calls to the charity has risen every year since 2015 and it expects the number to hit 189,000 by the end of the year – the highest level in five years.

Joanna Elson, chief executive of the Money Advice Trust, said: “We need to change how we think about problem debt in the UK.

“Ten years ago a typical caller to National Debtline was struggling to pay credit cards and personal loans. Today, callers are struggling with smaller but trickier debts, usually on everyday household bills – and often caused by ‘broken budgets’, where the money coming in is simply not enough to cover essential spending.”

The Money Advice Trust has set out a number of recommendations for the government, regulators, creditors and the advice sector to tackle these issues. It wants to see the following:

  • A cross-government strategy to reduce problem debt, bringing together government departments, agencies and regulators into a single, coherent approach
  • The government’s planned ‘Breathing Space’ scheme provides protections for people seeking advice from all types of creditors – including utility companies, local authorities, DWP and HMRC
  • Further action from the Financial Conduct Authority on persistent credit card debt, unauthorised overdrafts and extending its payday loan cost cap to other forms of high-cost credit.

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