Analysis by StepChange Debt Charity reveals that two in five clients who received advice in 2017 were behind on at least one of their essential household bills (such as energy bills, council tax, mortgage or rent). Across Great Britain, the charity estimates the number of people behind on priority bills was over three million.
Behind on the basics: a closer look at households in arrears on their essential bills, written by Grace Brownfield, Senior Public Policy Advocate, reveals a complex patchwork of difficulty. In some cases, people may be avoiding arrears only by taking on more credit.
Among renters, for example, those without rent arrears had significantly higher levels of borrowing relative to their income (77%) than those renters with rent arrears (55%).
Worryingly, an estimated 9.3 million people last year used credit to meet a household need – with 1.4 million of these using high cost credit.
Groups identified as being at higher risk of arrears on priority expenditure included lower income families, renters, people with an additional vulnerability, and younger people. This could be because they are more likely to have been affected by factors that increase the risk of arrears – namely a squeeze on income, rising living costs, insecure work, and regular income shocks.
The charity looked at the various types of bills clients were responsible for paying, and worked out the proportion of clients who had each type of expenditure who were behind on payments. Among those responsible for paying these bills, the most common arrears were on council tax (30%), water bills (23.7%), rent (21.5%) and mortgage (20.6%). Generally speaking, the lower the income of the household, the more likely they were to be in arrears.
Such arrears levels are perhaps unsurprising given that the typical StepChange client spends, on average, 60% of their net monthly household income on essential household bills plus food – while among those on the lowest net household incomes (under £10,000), an average 93% of their monthly income is swallowed up by the basics, leaving very little for other items such as clothing, school uniforms, travel, or household goods.
One particularly striking finding is that those working on zero-hours contracts, or with highly variable incomes, were twice as likely to have experienced arrears on priority expenditure in the past 12 months than those who worked full-time – and they were only slightly less likely to have fallen behind than those who were unemployed.
Peter Tutton, head of policy at StepChange Debt Charity, commented: “Our findings, while worrying, help pinpoint three positive steps that could be taken to reduce arrears through better help for people to make ends meet, reducing the need for them to turn to unaffordable borrowing.
“First, the Government must ensure that the right kind of debt support framework is in place – especially in the design of the new debt breathing space scheme, but also in the way that deductions from benefits are applied. At the moment, these can have perverse consequences.
“Second, policymakers should make it a priority to increase households’ financial resilience through helping them to build savings, to help more people cope with the “new normal” of insecure income and regular income shocks.
“Finally, there is a huge opportunity for utilities providers, local authorities, landlords and other creditors to reflect on how they can create more flexible and personalised payment schedules for people whose incomes fluctuate. For example, higher payments in some months and lower payments in others could help people to work around foreseeable financial pinch points in the year –and potentially help them to keep up their agreed payments.”