The National Audit Office’s findings on the government’s approach to problem debt
By Josie Warner, Research Insight and Planning Officer

Today, the National Audit Office (NAO) released their latest report, ‘Tackling Problem Debt’, which looks at the consequences of problem debt on both the individual and the taxpayer, as well as how successfully the government are understanding and dealing with this issue.
We were really pleased to assist the NAO with their report by providing information about some of key statistics and trends in our client demographics and the types of debts our clients hold.
We also supported this report by working with the NAO to produce our latest Creditor Conduct survey for 2018, where we asked our clients about their experiences, good or bad, with different types of creditors and bailiffs. (We’re due to publish our own findings from this study later this year. In the meantime, if you’re interested in viewing our results from 2016, you can find them in debt research on our site.)
Government debts
One of the main findings from the NAO report was the growth in the amount of personal debts owed to government. In 2011–2012, only around 21% of all debts owed were to government, whereas in 2017 this had risen to 40%.
Additionally, the NAO point out that “government lags behind the retail lending sector in following good debt management practice.”
For example, in the 2018 Creditor Conduct survey we asked our clients how fairly or unfairly they felt they had been treated by a range of different types of creditors. As presented in the chart below, government departments and local authorities rate fairly highly as some of the organisations which have treated people most unfairly
StepChange clients’ perception of if they were treated unfairly

The impact and cost of problem debt
By focusing on the impact of problem debt at an individual level, on issues such as a person’s mental health problems, the NAO have also been able to quantify and monetise the impact of this to both the public purse and the economy.
It’s unsurprising, as well as consistent with wider evidence (including our own as found in our Breaking the Link report), that the report finds those in problem debt are 7.76% more likely to report being depressed or anxious — equating to around 81,000 people. The estimated cost of £24 million per year to the NHS is staggering.
The NAO also found that:
- People are 2.85% more likely to be in state-subsidised housing if they have previously reported being in problem debt. This equates to 23,000 people at an estimated cost of £224 million per year
- The costs of problem debt directly on the public purse are £248 million, and £897 million on the wider economy
Recommendations and improvements
The NAO highlight some of the current issues of government departments’ approaches to dealing with problem debt.
For example, they find that the Treasury have issues with the coherence and transparency in the quality of the information on the nature of debts people owe to government and utility firms. This is particularly the case when compared against the commercial debt sector.
The NAO therefore state that weak links need to be fixed and “there is further to go before value for money is secured.”
The NAO also discuss the Treasury’s approach to the introduction of a Breathing Space scheme and new statutory debt management plan. We agree that design of the scheme should be carefully considered to ensure that they have the required impact on outcomes for those using it.
If the Treasury and other government departments make efforts to follow the recommendations as outlined in this report, improvements are definitely possible.
We’d hope that departments would look for advice and information from organisations such as StepChange on how to best carry out these recommendations so that, as well as a reduction in the cost of problem debt on the taxpayer and the wider economy, meaningful, positive improvements can be made to lives of those at risk or in financial difficulty.
