Almost a quarter of StepChange Scotland clients report the cost of living as the driver of their debt problems
StepChange Debt Charity Scotland client data for the fourth quarter of 2022 shows the cost of living increase was the leading cause of debt for almost a quarter (23%) of its new clients. This is more than double the figure in the first quarter of 2022 (10%), reflecting the upward pressures people have been facing despite government intervention and other support.
Energy arrears have continued to rise among StepChange Scotland clients, so much so that in Q4 electricity arrears (36%) overtook council tax arrears (33%) as the most common arrears type held by Scottish clients. Between Q1 and Q4 of 2022, the proportion of clients with electricity arrears rose by 8 percentage points from 28% to 36%.
By the end of the year, more clients were experiencing a negative budget, meaning that even after a debt advice session and budget counselling, their expenses exceeded their income. Between Q3 and Q4 the proportion of clients with a negative budget increased by two percentage points from 34% to 36%.
StepChange Scotland has also seen a slight increase in the proportion of new clients who are homeowners. In Q4 the charity saw the highest proportion of homeowners in 2022, with around one in five (19%) clients being homeowners.
To address the impact of the ongoing cost of living crisis, and the high prices for essentials that households continue to face, StepChange Scotland is urging the Scottish and UK Governments to go further to protect low-income households from mounting problem debt.
Sharon Bell, Head of StepChange Debt Charity Scotland, said: “We are seeing incredibly high client volumes at the moment, and while a seasonal upturn in demand for debt advice is normal in the new year, such high demand may be an indicator that people’s ability to keep up with the huge price rises we saw last year is waning, with more falling behind on household bills.
“In particular, the incidence of energy arrears among our clients is concerning, especially as it may be a while before we start to see significant reductions in the price of gas and electricity.
“We’re urging the Scottish Government to work alongside public bodies to take a measured approach towards debt enforcement, reducing harmful practices that push people into further financial difficulty. Firms should be proactive in identifying customers who are struggling to offer them additional support and signpost to money advice services.
“With energy debt remaining high, the UK Government must be mindful of how households will cope once the average price of energy rises in April, and the energy support scheme comes to an end. While some support for low-income households will stay, it falls short of what was previously offered and exposes many more households to potential financial difficulty.”