In its report Scotland in the Red released on Tuesday, StepChange Debt Charity Scotland reveals that thousands of households in Scotland are being driven into soaring levels of unrepayable debt due to huge household bills – especially Council Tax.
The charity was contacted by over 30,000 people last year seeking debt help, across every constituency in Scotland.
Scotland in the Red reveals that in January-December 2018:
• StepChange Scotland saw an increasing number and proportion of clients with Council Tax arrears. In 2018, 46% of clients had Council Tax arrears with an average value of £2,017.
• The average amount of money clients had left over after meeting housing costs, paying to heat their homes and paying Council Tax was just £12.64 a month.
• More clients in Scotland are falling behind with their household bills.
Nearly one in five clients were behind on their electricity bill, a 4% jump on 2017, and they owed an average of £826, a 10% increase in just one year.
• More clients in Scotland are in debt because of reductions in income or benefits.
In 2018, 25% of clients said that a reduction in income or benefits was the reason for their debt, an increase of 7% in just one year.
Commenting on the findings, Sharon Bell, Head of StepChange Debt Charity Scotland, said: ‘The vast majority of StepChange clients are in problem debt due to circumstances they could not have prevented or planned for such as unemployment, ill-health or reductions in income.
‘I am increasingly alarmed by the increases in the proportion of our clients who are struggling with household bills, particularly Council Tax.
‘Our research shows that our clients in Scotland are significantly more likely to have Council Tax arrears compared to elsewhere in the UK.
‘We are seeing a record level of demand for help with problem debt, with over a third of our clients having an additional vulnerability, such as illness.
‘We need more signposting to free debt advice, as the earlier someone gets debt advice the greater their options may be and the less harm they could experience.’
Scotland in the Red analysed client data across every Scottish constituency to get a picture of how StepChange Scotland clients were affected in 2018.
‘We believe that there are nearly 700,000 people in Scotland at risk of, or in, problem debt.
Problem debt in Scotland today is primarily a symptom of poverty, poor housing conditions, welfare cuts, ill-health and insecure work.
We know that borrowing is increasing and this can be seen in the increasing proportion of our clients with personal loans.
Who is vulnerable to problem debt?
Just over 60% of our clients are in debt due to circumstances they couldn’t have prevented or planned for, called “income shocks”.
These are unexpected life events such as ill-health, reductions in wages, sudden changes to welfare payments or unemployment.
As people use what credit is available to them to bridge the gap, they find themselves falling deeper into debt, with spiralling costs until eventually the situation is unsustainable.
Early signposting to debt advice is crucial to break the cycle of problem debt.
There was an increase of £62 in the net monthly average income of our clients, from £1,253 in 2017 to £1,315 in 2018.
However, over the last five years the change in the average income remains marginally below inflation, meaning client incomes are down in real terms.
The increases in average arrears of our clients’ priority debts such as rent, utilities and Council Tax demonstrate that their financial resilience has decreased.
Over a quarter of clients who were tenants were in arrears with their rent.
Scottish clients had an average of £11,754 unsecured debt.
46% of our clients are in arrears with Council Tax.
25% of all clients are in debt due to reductions in income or benefits, an increase of 7% since 2017.
More people are struggling with their household bills.
Average rent arrears have increased 18% to £819 The average amount of Council Tax arrears is £2,017.
Council Tax – a growing emergency
The proportion of our clients in arrears with Council Tax, which includes water and sewage, has shot up alarmingly, from 36% of clients in 2014 to 46% of clients in 2018.
On average clients have Council Tax arrears of £2,017, a 26% increase since 2014 when the average level of Council Tax arrears was £1,592.
Our data show that clients in Scotland are significantly more likely to have Council Tax arrears compared to elsewhere in the UK (46% compared to 30%).
Our key recommendations
1. Earlier signposting to free debt advice.
We need more signposting to free debt advice, and we need people to be encouraged to seek advice earlier: stigma is still a big problem and organisations working with the public should reiterate that anyone can find themselves in difficulty.
The earlier someone gets debt advice, the greater their options may be and the less harm they could experience.
2. Urgent action on Council Tax
We want Local Authorities to work with the advice sector to develop a best practice toolkit to address Council Tax arrears.
We want Local Authorities to consider separating the water and sewage charges from Council Tax bills to make it clearer to everyone what they are paying.
3. Scotland needs a coordinated action plan for addressing debt
The social cost of problem debt in Scotland is around three-quarters of a billion pounds; impacting all public services, individuals, families and communities.
People who are at risk of debt are also vulnerable to public policy choices.
Therefore a Minister is required to coordinate and develop a high impact action plan to address the crisis that is blighting many lives and businesses across Scotland.
At StepChange Debt Charity Scotland, we consider all our clients to be financially vulnerable.
However, a number of our clients also have an additional vulnerability such as physical or mental health conditions.
Our data show that Scottish clients are more likely to have a vulnerability than clients elsewhere in the UK; 35% of Scottish clients had an additional vulnerability compared to 27% elsewhere.
We have a dedicated team of specialist advisors who provide enhanced support for these clients, working hand in hand with other organisations, such as Macmillan, Samaritans and the RNIB.’