New research from the Money Advice Trust, the charity behind National Debtline and Business Debtline, has unveiled a stark reality: 6.8 million UK adults, or 13 percent of the population, are struggling to pay for essential costs such as rent and council tax. Despite inflation dropping to 2 percent, an estimated 11.4 million people, representing 21 percent of the population, report that their financial situation is worsening.
The Lingering Impact of the Cost of Living Crisis
The findings, derived from an Opinium poll of 2,000 UK adults, highlight the ongoing challenges faced by millions of households. The data from the charity’s debt advice services paint a picture of widespread financial distress. More than two in five National Debtline clients (43 percent) and over half of Business Debtline clients (51 percent) are grappling with insufficient income to cover essential costs.
Growing Debt Burdens
The research points to an increasing debt burden for the most essential costs, with severe consequences if unpaid. The average amount owed in rent arrears has surged by 21 percent over the past year, now standing at £1,904. Energy arrears have also risen significantly, with the average amount owed climbing by £419 to £1,541. Over a third (35 percent) of clients are now dealing with energy debt. Council tax debt has seen an even steeper increase, with the average amount owed rising by 49 percent since 2019 to £1,762 this year.
Factors Contributing to Financial Difficulty
The charity’s insights reveal that certain demographics are more likely to experience severe financial difficulty. National Debtline clients with a negative budget are more likely to be renters (76 percent), and among these renters, the majority are sole tenants (76 percent). Relationship status also plays a significant role, with three in five (62 percent) National Debtline clients with a negative budget being single, lone parents, or widowed, compared to married clients or those living with a partner (23 percent). Additionally, more than half (53 percent) of National Debtline clients receiving Universal Credit have a negative budget.
Business Debt on the Rise
The financial distress is not limited to individuals. The level of business debt among callers to the Business Debtline service has more than doubled since 2020, rising from £20,592 to £49,900. This increase is partially driven by the financial impact of Covid-19. Furthermore, over a quarter (26 percent) of Business Debtline clients have tax debts, with the average amount owed increasing by 84 percent since 2020 to £12,724. The average amount owed in energy debt has almost doubled, rising from £913 to £1,738.
Calls for Government Action
In light of these findings, the Money Advice Trust is urging the new government to prioritize support for people in financial difficulty. This includes ensuring that individuals on the lowest incomes can meet their essential costs. The Labour Party has committed to reviewing Universal Credit in their manifesto, and the Money Advice Trust, along with the Joseph Rowntree Foundation and over 90 other charities, is calling for an Essentials Guarantee to link the rate of Universal Credit to the cost of essential goods, including food and utilities.
Urgent Need for Support
Steve Vaid, chief executive at the Money Advice Trust, emphasized the urgent need for government intervention: “Inflation levels may have subsided, but intense financial pressure continues to put strain on many households and small business owners. One of the biggest challenges facing the people we help is that many simply don’t have enough coming in to cover their essential costs.
“Supporting people out of debt needs to be an urgent priority for the new Government. This needs to include helping people on the lowest incomes by ensuring anyone receiving Universal Credit has enough to cover their essentials.”
As the new government steps in, the focus on alleviating financial distress and supporting those struggling with debt will be critical to addressing the ongoing cost of living crisis and ensuring financial stability for millions of UK households and businesses.
