More than three million people in the UK are estimated to be in arrears on at least one essential household bill including gas, water, and rent, new research has revealed.
Council tax is the bill most had fallen behind on, according to debt charity Step Change.
In some cases to avoid going into arrears people are taking out more credit, with 9.3 million people using a credit card last year to pay for a household bill.
Households were most likely to be behind on council tax bills, followed by water bills
Meanwhile 1.4 million used high cost credit and took out a payday loan to pay an essential bill.
Step Change, which published the research in its ‘Behind on the basics’ report, surveyed 5,052 adults in order to estimate how many millions were in arrears on household bills, and how they are paying these bills.
It also analysed data from its 357,386 clients in 2017 and of these 140,000 were behind on at least one household bill.
Of the people it spoke to, most were behind on their council tax bill by an average of £1,021. As many as 30 per cent of the charity’s clients were behind on theirs last year, followed by water bills, at 23.7 per cent.
Housing costs also included and 21.5 per cent were behind with rent while 20.6 per cent were behind with mortgage repayments at some point last year.
Those earning the lowest net household incomes of under £10,000 per year, spent an average of 93 per cent on basic costs, leaving very little for other bills such as clothing, travel or household goods.
Meanwhile on average its clients spent 60 per cent of their monthly household income on essential bills plus food costs.
Rising costs: 9.3 million people took out a credit card last year to pay for a household bill
Those with zero-hour contracts, or highly variable incomes, were twice as likely to have experienced arrears on basic bills last year compared to those in full-time work.
Those aged under 60 were more likely to be struggling. Of those aged under 25, 35 per cent were in arrears on one or more household bill, this rose to 39 per cent for those aged 25 to 39, 44 per cent of those aged 40 to 59 and fell to 34 per cent of those aged 60 and over.
The report said four specific groups were most at risk of falling into arrears with their bills. These were lower income families, younger people, renters, and people with a vulnerability.
These groups were more likely to have been affected by things such as a squeezed income, insecure work and regular income shocks, the charity said.
It is now calling for a number of actions to be made to help those in this situation.
This includes making sure people in arrears get the right support and that providers show flexibility and discretion in how arrears are handled.
Utilities providers, creditors, local government and landlords also need to consider whether there is more they can do to help those with fluctuating bills to make regular payments and the DWP should improve the system whereby payment for arrears can be taken directly from people’s benefits.
Those earning under £10,000 spent 93 per cent of their income on basic household costs
It said the government also needs to lead a review looking into how to increase financial resilience when it comes to households paying these regular bills.
Peter Tutton, head of policy at StepChange Debt Charity, commented: ‘Our findings, while worrying, help pinpoint three positive steps that could be taken to reduce arrears through better help for people to make ends meet, reducing the need for them to turn to unaffordable borrowing.
‘First, the Government must ensure that the right kind of debt support framework is in place – especially in the design of the new debt breathing space scheme, but also in the way that deductions from benefits are applied. At the moment, these can have perverse consequences.
‘Second, policymakers should make it a priority to increase households’ financial resilience through helping them to build savings, to help more people cope with the ‘new normal’ of insecure income and regular income shocks.
‘Finally, there is a huge opportunity for utilities providers, local authorities, landlords and other creditors to reflect on how they can create more flexible and personalised payment schedules for people whose incomes fluctuate.
‘For example, higher payments in some months and lower payments in others could help people to work around foreseeable financial pinch points in the year –and potentially help them to keep up their agreed payments.’
140,000 clients of Step Change were behind on at least one essential household bill last year
Last month the Government confirmed its ‘breathing space’ scheme, a period whereby fees, charges, interest or collections activity are suspended from a person’s debt, would be extended to people receiving NHS mental health crisis services.
The announcement came as research showed 23,000 people in England struggled with problem debt last year while receiving hospital treatment for mental health.
The Debt Respite Scheme was announced last year and is proposed to be six weeks. However, several charities have said this needs to be longer and the exact time period and how it will work are yet to be confirmed.
How to find help with problem debt
There are a whole host of debt charities out there which offer impartial advice for free.
This is Money also has a helpful guide to getting your finances back on track and dealing with debt if you are worried you could be slipping into debt problems