Households struggle to pay bills as demand for debt help hits five-year high

Published by Stephen Little on 04 September 2018.
Last updated on 04 September 2018

Demand for help with debt is expected to reach a five-year high as more families struggle to pay household bills, according to National Debtline.

The charity, which is run by the Money Advice Trust, says it expects to receive 189,000 calls by the end of the year – the highest level in half a decade – with webchat and online demand also increasing.

It says that while fewer people are seeking advice about credit cards, loans and overdrafts, people are reporting more problems with “smaller and trickier” debts on household bills.

Half of all callers are now struggling to repay debt of £5,000 or less – up from just 22% in 2008. 

National Debtline says that people are finding it difficult to repay these smaller levels of debt as they do not have enough money coming in to cover essential spending. 

Joanna Elson, chief executive of the Money Advice Trust, says: “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 their essential spending.”

Nearly half (48%) of National Debtline callers now have a budget deficit – up from 27% in 2009.

Three in 10 callers now have council tax debts – up from just 15% in 2008.

The proportion of callers with rent arrears has risen from 6% to 17%, while energy arrears have gone up from 9% to 17% in the same period.

The Money Advice Trust is calling for the government, regulators, creditors and the advice sector to introduce a single approach to reduce the debt problem.

It also wants the government’s planned ‘breathing space scheme’ – which will give those in debt a grace period of up to six weeks from further interest, charges and enforcement action – to provide protections for people seeking advice from all types of creditors – including utility companies, local authorities, the Department for Work and Pensions (DWP) and HMRC.

Ms Elson adds: “The government, regulators, creditors and the advice sector need to work together to tackle these new realities. There is some good news with the creation of the new single financial guidance body [the new body combining the Money Advice Service, The Pensions Advisory Service and Pension Wise], plans for a statutory breathing space scheme and a renewed focus from creditors on supporting people in vulnerable circumstances.”

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It's interesting that such a

It's interesting that such a high proportion of the people are seeking advice about council tax. Makes you wonder what's going wrong there doesn't it? Where I live the Borough Council used (they appear to have been forced to stop it) to take a very heavy-handed approach to late payments. Rather than send out a simple reminder if someone missed a month they imposed a £75 'fine' on the account and that continued every month until the debt was paid off. It was completely daft (and questionably legal) because it just made the problem worse.

Our County Council is as bad. The year before last I got involved in a case where an elderly resident wasn't making the co-payments he'd agreed towards first his home care package and then his nursing home. Rather than do a bit of sensible debt management (basically - find out what the problem was and resolve it) Social Services just let the debt build up and then sent it to their legal department for recovery action. In the end they lost out and were forced to write off about £10,000 as unrecoverable.

In complete contrast last year I got involved in a very messy financial problem where another elderly man had run up £22,000 in credit card debts and loans. There was no way he could ever pay it back - his monthly repayments were about twice his pension. Working with the creditors I got that all frozen and it's being held on token monthly payments totaling £26 with expectation that in due course it will all be written off.

Hi David, you are correct,

Hi David, you are correct, this is a trend we have reported on before:

https://www.moneywise.co.uk/news/2018-08-21/call-tougher-bailiff-regulation-household-debt-hits-19-billion

Indeed, the parliamentary Treasury Committee called for public bodies to improve their debt collection standards:

https://www.moneywise.co.uk/news/2018-07-26/ditch-the-triple-lock-state-pension-should-rise-line-earnings-say-mps

Best,

Moneywise Edmund