Debt and arrears levels rocket among StepChange Scotland clients in 2022

StepChange Debt Charity Scotland’s 2022 Scotland in the Red report, published today, reveals the toll a year of increased living costs has had on Scots’ finances. Despite government interventions to help with soaring costs, the average amount a StepChange client is behind on household bills has increased by a shocking 68%, from £1,739 in 2021 to £2,920 in 2022.

Among arrears on essentials, energy bills were a particular pressure point for clients last year. In 2022, 75% of all clients and 85% of vulnerable clients¹ were in arrears with their electricity bills, rising from 63% of all clients and 75% of vulnerable clients in 2021. To address the increase in energy arrears, StepChange Scotland is calling for more tailored support for struggling households from providers, including the write off of energy debt where someone simply cannot afford to pay.

The report also reveals a 27% increase in average unsecured debt levels, rising from £12,730 in 2021 to £16,174 in 2022. This stark rise reflects a cost of living-driven shift in the profile of a typical StepChange Scotland client, as more middle-income families are contacting the charity for support. Average monthly income among all clients increased by 10% from £1,397 in 2021 to £1,543 in 2022.

Despite clients’ average income increasing, the average amount remaining in a client’s budget after they account for their essentials, fell by 9% from £153 in 2021 to £139 in 2022. There has been a similar decrease in vulnerable clients’ budgets too, falling by 33% from £107 in 2021 to £71 in 2022, suggesting the disproportionate impact that the cost of living crisis has had on vulnerable clients.

The trends seen last year show little sign of improvement as StepChange Scotland has also published its quarterly client data for January – March 2023 today, which shows over one quarter (26%) of clients cited increases in living costs as their main reason for debt in Q1’23, which is a three percentage points higher than the previous quarter and 16 percentage points higher than a year ago. Since Q3’22, this remains the most commonly cited cause of problem debt among clients.

StepChange Scotland says these figures are worrying but not surprising. They represent a culmination of years of stagnating incomes in which financial resilience has been consistently low, leaving many households particularly vulnerable to economic shocks. The charity wants to see targeted support for households continue in 2023 and beyond, to prevent people from remaining trapped in long-term financial difficulty.

Sharon Bell, Head of StepChange Debt Charity Scotland, said:

“Looking at our clients’ finances from 2022, it’s clear this crisis is sweeping a wider pool of people into financial difficulty. For the most financially vulnerable households, the struggle of keeping up with the cost of essentials is nothing new, but after the pandemic and many years of stagnating wages, the safety nets to catch people affected by a sudden jump in inflation are simply not there, and they are running out of tools to cope.

“It’s important the Scottish and UK Governments, as well as creditors, are attuned to the difficulties people are facing, as well as the pressure on advice providers at this time. With energy debt so high, action is needed to prevent just coping households falling deeper into difficulty, including the writing off of arrears where someone cannot afford to pay. Where there is a build-up of arrears, creditors must take a fair approach to enforcement action, with a focus on engaging and supporting struggling customers over punitive debt collection.”