Rise in serious debt cases according to Money Advice Trust charity

June 10, 2014

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By Lucy Palmer-Richeson
16th May 2014

There has been a significant increase in calls from people falling into debt because they cannot afford to pay their household bills, according to the Money Advice Trust (MAT) charity.

The charity has published a report showing it helped 150,000 people with household bill debt in 2013, a 140% rise since 2007, before the financial crisis began.

According to the report, whilst the calls to the charity’s National Debtline have increased from people seeking advice on debts concerning energy, water, phone and council tax bills, fewer people are reporting problems with traditional credit products such as loans, credit cards and bank overdrafts.

The report shows that since 2007 it has seen an increase of 305% in the calls it takes regarding water rate debt, a rise of 230% with those struggling with telephone bills, and a 171% increase in those concerned about their energy bills.

It also saw a massive 97% increase in calls concerning catalogue shopping bills, and a jump of 95% in the amount of calls it received concerning council tax payments.

According to the report, “The trend for price rises in essential expenditure areas has distanced some households from the impressive recovery of the UK economy in recent years.

“These households have instead witnessed a steady but undeniable decline in their spending power and a greater strain on their household finances.”

Joanna Elson, chief executive of the MAS, said: “The gradual erosion of some families’ surplus income in the face of rising prices has led to a new generation of debt problems – one to which more people are vulnerable, one which is harder to resolve, and one which has no definitive solution.

“We’re hearing from more people in serious debt difficulty as a result of debts totalling less than £5,000. When there is little room in a household budget to meet basic expenses, paying off debts can seem impossible.

“With interest rates set to rise it is vital that we can help families on the financial brink. The impressive recovery of the broader economy should provide opportunities to help halt the rise of these debt problems,” she said.

“Recent government announcements, such as an increase in the minimum wage is a positive step towards helping these families, but more can be done,” she said.

The MAS asked that the newly appointed regulator the Financial Conduct Authority help encourage financial products and services which meet the needs of households with very tight budgets.