Our latest statistics: Personal debt in the first half of 2018
By Josie Warner, Research Insight and Planning Officer
Today we released our latest Statistics Mid-Year Update, which looks at our key client statistics for January — June 2018.
Our latest stats reveal a range of findings about those contacting us for advice. For example, two thirds of our new clients were aged under 40 (although only one third of the UK population falls into this younger age group), more than six in 10 of our clients are female, and unemployment/redundancy is the most common reason why clients needed to contact us for advice.
This update also highlights that more than two thirds of clients have a credit card debt, with an average amount of £7,603. If we take all debts into account, the average debt amount is now £13,382 — a slight rise compared to 2017 (£13,280).
Additionally, our latest stats show that two in five clients are behind on at least one priority household bill. We’ve seen particular rises in the proportion of clients with energy arrears, while the proportion of clients with council tax arrears has remained alarmingly high.
Council tax arrears
Council tax is the bill which the highest proportion of clients are behind on. Between January and June this year, 36,086 new clients were in council tax arrears, equating to almost one third (30.1%) of all who had a responsibility for paying a council tax bill.
Worryingly, the proportion of clients behind on their council tax payments has remained at exactly the same high level in every Yearbook update since 2015.
We also found that council tax arrears are particularly prominent among clients with deficit budgets (where a client’s monthly outgoings exceed their monthly income). Almost half of all (48%) clients with a deficit budget were behind on making their council tax payments.
Energy bill arrears
It’s necessary to track some of our data for seasonal differences. Due to the cold weather, many StepChange clients fall behind on energy bills in the months following winter. Therefore we typically see a higher proportion of clients in arrears for energy bills between January and June compared to the latter six months of the year.
When we compare the first six months of this year against the same period last year, there’s a notable rise in the proportion of clients who have fallen behind on their energy bills.
There are several contributory reasons for this increase, For example, this may be due to a rise in energy prices across the sector last year, with many suppliers putting up their prices between 4.5–5%.
Additionally, we had particularly adverse weather at the end of last year and start of this year, with many clients being affected by the snow-filled ‘Beast from the East’. This shows how random external factors, in this case a cold winter, can affect our clients’ debt situation.
Payday or short-term high-cost credit debt
Although the old ‘payday’ market doesn’t exist in the same way it once did due to Financial Conduct Authority (FCA) reforms in 2015, we’ve continued to see a growth in the proportion of clients seeking advice for short-term high-cost credit loan debts (often 2–6 months in length) over the past few years.
In 2015, 15.7% of clients had a payday loan or short-term high-cost credit debt. This has been steadily rising and now stands at 18.3% for the first half of 2018.
Therefore, even despite Wonga falling into administration over the summer, our client data indicates that many are still relying on this type of credit.
There’s a clear age distinction with this debt type too. Almost a quarter of those aged under 40 have a payday loan or short-term high-cost credit debt, compared to just 13% of those aged over 40, and just 3% of those aged 60 and over.
It’s also interesting to break this type of debt down by other demographics. For example, three in 10 of all clients making board payments (e.g. those living with parents) had a short-term high-cost credit debt. However, there are strong correlations between younger clients and clients making board payments.
What we’d like to see
High levels of council tax arrears among our clients are a concern as local authorities often use bailiffs to collect the debt owed.
We want to see councils offering affordable repayment plans and using less invasive and expensive methods of collecting this debt. There are already good examples of this practice, and we’d like to see more.
In terms of dealing with growing levels of energy arrears among our clients, we welcome the upcoming energy price cap. However, we still need to see more utility providers establish flexible repayment schemes for consumers, particularly in the context of an increasingly flexible and insecure labour market.
We also feel the government should look at how to better support the financially vulnerable by providing more affordable alternatives to high-cost credit. You can read more about this in our blogpost ‘The high cost of credit’ .
Our next statistical update will be in spring 2019, where we’ll update you on full year’s data of our clients for 2018.
Find out more about the 2018 Statistics Mid-Year Update and read the full report on our website.