Living in Arrears: More Than Just a Number
It’s been 6 months since we sounded the alarm about people falling behind on bills because of the cost-of-living crisis. We found that household bills and benefit debts had reached an estimated total of £22 billion. Since then, arrears have only grown further — and it looks like it will only continue.
Look into the new financial year and you’ll see council tax bills rising, with rent, mobile phone and internet bills also going up. Despite talk from some politicians about an end to the cost-of-living crisis, households will continue to feel the pressure of high essential costs.
We talk about the numbers, but arrears are more than just a number. Here’s what the people coming to us, our advisers and data tell us about what it’s like, day-to-day, to be behind on your basic bills.
Arrears are deepening
Household arrears are the result of people falling behind on bills, like energy, water, rent and council tax. As the cost-of-living has increased, we’ve seen more people unable to cover essential costs. Even after expert debt advice, they have more going out than coming in.
Nationwide, we estimate that nearly 5 million people are in a negative budget. Many of these people will have been building up more and more debt on their household bills.
Half of those who come to us for debt advice now owe money to their electricity providers, compared to 29% at the beginning of 2019. Meanwhile, 35% now owe money on their rent, compared to 28%.
“I think everyone I’m supporting at the moment has council tax arrears. They’ve not been paying those liabilities to be able to provide food for the family.”
— Citizens Advice Debt Advisor
What’s more, when people come to us, they’re now significantly deeper into arrears. The average amount of household arrears is up from £,1004 in 2019 to £1,818 now (an increase of 81%).
Once you’re in debt — one problem leads to another
People in debt are disproportionately likely to be facing other issues in their lives, and we see this in our data. [1] On average, people who see us for a debt assessment have 13 issues they need help with, compared to 5 issues for everyone else who comes to us for help. Often these issues span across other areas like benefits, housing and employment.
The relationships here are complex. It may be that debt causes these issues, or the other way around. Either way — it makes it much harder for people in debt to get back on their feet.
Then, there’s also the high stakes consequences that stem from being in debt. Household arrears like rent, energy, and council tax are what our debt advisers call ‘priority debts’. They can cause you particularly serious problems if you don’t do anything about them.
Falling behind with an energy supplier could mean you are disconnected from electricity, causing health issues from living in a freezing home. Or the local council could send bailiffs to take away essential possessions, like a car used for going to work or visiting friends and family. Rent arrears can even lead to being evicted and made homeless.
“[My debt] messes with my anxiety and depression because it’s quite a lot of money. They can actually cut off my gas and electricity and having 5 children and a couple of them being scared of the dark isn’t good, so I worry about that quite a lot. The struggles I have affect my mental health. Most of the time I can control it but sometimes it does get to the point where I have to go to the GP and get some medication.”
— Anonymous service user
So when you’re in arrears, you’re not just facing the challenge of finding the cash to get back in the black, you’re living in fear of serious consequences — possession claims, eviction notices, and mistreatment by bailiffs.
Constant worry and poor collection practices make things worse
Repeated contact from creditors and bailiffs coming to the door can be overwhelming, particularly when there are multiple creditors. On average, people who’ve had one of our debt assessments owe money to four different creditors.
Some creditor collection practices have improved rapidly over the last 10 years. Unfortunately, there’s still a long way to go when it comes to council tax arrears.
Many local councils do not conduct affordability assessments when calculating repayment plans, leading to demands for unaffordable repayment. Councils can also use bailiffs to recover debts, who charge the debtor additional fees. And far too often we see that debts are passed over to bailiffs too quickly, making a bad situation even worse.
Max’s story
Max approached us with multiple arrears — rent, energy, water, and council tax. His and his wife’s combined monthly income from work and benefits is £2,126, with 2 dependent children to support. Without assessing what they could realistically afford, the local council passed his council tax debt to bailiffs, who added collection charges and then knocked at the door — demanding £1,000 per month. This demand was unmanageable for Max’s family and put them at risk of racking up more energy debts.
Our advisor’s regularly see the real impact this has on people’s lives:
“This approach, using fear tactics to set up unaffordable payment plans, severely impacts families with dependents, putting them under immense financial and emotional strain.”
— Evidence form
Advice helps — but it can’t solve the underlying issue
When people come to us for help, debt advisors will go through their income and outgoings to help them to maximise their income, create a budget, and prioritise their debts. Whatever is left at the end of the month, will go towards repayments.
However, this is becoming increasingly difficult as more than half of those who contact us for support are in a negative budget. Even after expert advice, these people still have more going out than coming in, meaning it’s almost impossible to make repayments.
More and more, we’re seeing people who have cut back on essentials like food to cover the costs of repayment — desperate to avoid evictions or bailiff action.
“There’s not really many options at the moment. Whereas we used to have quite a big maximising income list we could go through with them, they’re coming to us having done that already. There’s just nothing we can budge in their budget at the moment.”
— Citizens Advice Debt Advisor
Our advisers do all they can to help people get on top of their debts — like hitting pause through breathing space or helping them access insolvency options, like debt relief orders (DROs). Yet they can’t always prevent the worst consequences.
Worryingly, last year we saw a 19% rise in people coming to us about bailiff enforcement on their council tax bill. At this stage, even our advisers may be unable to prevent enforcement. We’re also helping a record number of people with homelessness — and being evicted for rent arrears is a key driver of this.
“This last year, we saw far more emergency situations, people threatened with eviction, people that are being evicted, people that are being sent court notices and things like that.”
— Local Research and Campaigns Manager
Even when people do have a little left at the end of the month to go towards repayments, they are often paying this off really slowly, leaving them stuck in debt for years.
What can the government do to fix this?
Household arrears have really serious consequences for people. With sustained financial pressure on household budgets this year, we need to do everything possible to stop the ripple effects of arrears from spreading.
For people living in arrears, collection practices can be improved to help people cope with managing repayments. This includes tightening collection standards at a national level for council tax arrears, including compulsory affordability checks when calculating repayment plans and banning bailiff use for people on council tax support. When people do hit crisis point, we need to ensure they aren’t picked off by predatory companies, and provided with unsuitable debt solutions.
Ultimately, we also need to tackle negative budgets to prevent more people getting dragged into household arrears and existing arrears deepening further. This means measures which tackle low incomes and high costs, putting people back on a secure footing. We’ve laid out some thoughts on where it’s best to start.
[1] When people come to Citizens Advice for help our advisors will record the problems they need help with, giving us up-to-date data on what issues people need help with and how those problems link together.
