Cost of living leaving more new clients struggling with essential bills

New StepChange Debt Charity client data for December 2022 reveals a higher proportion of clients in arrears on priority bills including gas, mortgage payments and council tax. The proportion of new client in gas arrears in December rose by three percentage points (27%) compared to November (24%) 2022, while December also saw a two percentage point increase in clients with mortgage arrears (17%) and a one percentage point increase in both council tax (34%) and rent (21%) arrears compared to last month.

The cost of living remains the main driver of debt among new clients, with a one percentage point month-on-month increase to 22% in December 2022.

The proportion of clients with a negative budget – meaning that even after a debt advice session and budget counselling, their expenses exceeded their income – is up by two percentage points to 35%, also the highest proportion of 2022. The proportion of clients in receipt of Universal Credit is 34%. Clients who claim Universal Credit are more likely to be under 40 (67%), identify as a woman (73%), have children (60%), and around a half (48%) also have a negative budget.

While the number of new clients accessing full debt advice fell – a seasonal trend, which is consistent with previous years – StepChange’s emergency funding webpage saw a 15% increase in views between November (20,000) and December 2022 (23,000).

Meanwhile, The Bank of England’s Money and Credit statistics for December, released today, show a fall in net consumer borrowing from £1.5bn to £0.6bn, driven by net repayments of £0.5bn on credit cards. However, net borrowing on other forms of consumer credit like personal loans reached £1bn, its highest point since October 2019, suggesting while many people are cutting back in order to repay credit, others are turning to different forms of borrowing to paper over the cracks caused by the rising cost of living.

Richard Lane, Director of External Affairs at StepChange Debt Charity, said:

“December’s rise in the proportion of new StepChange clients in arrears on priority debts like gas, mortgage payments and council tax, combined with a month-on-month increase in the proportion of new clients unable to make ends meet, is a real cause for concern.

“We have had an exceptionally busy start to 2023 and while January is always a busy month, the relentlessly high demands of the cost of living crisis on people’s finances are clearly forcing more and more people into difficulty. The Bank of England’s new data suggests that a consistently high number of people are turning to borrowing to mask a shortfall in income or to cover unexpected expenses. With our own data showing a higher proportion of people unable to keep up with even the most essential bills, the warning signs of substantially more people being swept into financial difficulty are there for all to see.”