One in five people expects to be driven into problem debt this year

This Debt Awareness Week, StepChange urges Government to pull ‘every lever at its disposal’ to shield those on the lowest incomes from the worst effects of the cost of living crisis

New polling from StepChange Debt Charity shows that millions of people expect to fall into problem debt this year due to the rise in the cost of living, energy price caps and National Insurance contributions. The representative survey, conducted by YouGov, shows:

  • One in five people (21%) thinks that external financial pressures this year, such as the increasing cost of living and energy price cap rises, will cause them to go into debt they would be unable to pay back
  • One in three people (31%) expects to struggle to pay for essentials such as a healthy diet and appropriate clothing for the weather
  • Nearly half the population (47%) expects to use up their savings this year
  • 42% of people anticipate struggling to pay for a regular bill such as their gas, electricity or council tax in 2022
  • This rises to 48% among 25-49 year olds – the highest proportion of any age group

Meanwhile, new StepChange modelling of the impact of the projected October energy price cap rise is cause for yet more concern. Should energy bills hit £3,000 per year, the modelling shows the most financially vulnerable households will be spending £1 in every £6 on energy costs – more than double the amount now.

The news comes as the charity is urging people who are struggling to reach out for help as part of its annual Debt Awareness Week. Many StepChange clients say they’ve waited long periods – sometimes a year or more – to access advice, often due to the perceived stigma and embarrassment they feel about their financial problems. StepChange is encouraging people to open up the conversation and get advice as soon as possible before their situation worsens.

StepChange is urging the Chancellor to use his Spring Statement this week to do more to protect people from the worst effects of the cost-of-living crisis. A briefing was sent out to MPs last week and includes the following proposals:

  • Uprate benefit levels by 7% inflation: The government should increase benefits by at least 7% in April to match inflation and ensure people on the lowest incomes aren’t left adrift as bills continue to rise.
  • Stronger energy bill support: This should include expansion of the Warm Home Discount (WHD) scheme so that people on means-tested benefits and pension-credit are automatically supported with their fuel costs.
  • Better forbearance from Government: Ministers should look urgently at what more they can do to help people in debt. This should include suspending energy company recovery of debt from people who can’t afford their bills and an emergency pause on the DWP’s programme of benefit deductions (as happened during the pandemic) to help people with energy and other debts, providing support for some 3 million of the UK’s poorest households.
  • Investment in local crisis support: Ministers should urgently provide a similar scale of investment to the £500m offered to local authorities during the pandemic so they can support people with vouchers, grants or discretionary payments to cover essential bills.

Phil Andrew, Chief Executive of StepChange, said:

“These figures make for grim reading and emphasise just how dire the coming months will be for financially vulnerable people. Without bold action from Government, more and more people face falling into problem debt, eating through hard-earned savings or going without the basics just to get by.

“Government must pull every lever at its disposal in order to protect those on the lowest incomes from the scars of debt and destitution. While the initial raft of support announced in February was welcome, the war in Ukraine has exacerbated an already difficult situation and more action is clearly needed. The expansion of the warm home discount scheme to provide targeted help with energy bills, greater forbearance and support for people struggling with energy debt and arrears and the uprating of benefit levels to keep pace with inflation are the key ways to alleviate the crippling financial burden many people are now facing.

“This week also marks StepChange’s annual Debt Awareness Week, which comes at a time when it’s never been more important to kickstart the conversation around debt. If you are struggling with your finances right now, you don’t have to suffer in silence; free, impartial advice is available.”