‘People use candles because they’re scared of the bills’: a day with a debt charity helpline

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‘I’ve had nurses and teachers calling up,” says Sally Marshall, when asked if the financial pressure caused by the cost of living crisis is changing who is calling the helpline she answers for the debt charity StepChange.

The charity’s heartland is the poorest 20% of households in the country but the dramatic jump in living costs over the past year means more middle-class Britons are struggling to keep their heads above water.

They tell Marshall: “My energy supplier has asked me to call you because my direct debit was £150 and it’s gone up to £350.” The debt adviser, who is based in the charity’s Chester office, says: “That £200 is having to come out of their food or clothes for the children.”

January is usually the busiest month of the year for organisations such as StepChange as bills arrive for the credit cards and other forms of borrowing that covered the cost of Christmas.

However, StepChange, the UK’s largest debt advice charity, has already been seeing a big increase in demand. Its most recent data, for October, showed client volumes were up 17% on a year earlier. A “cost of living increase” is now the most common cause of debt, with a fifth giving that reason, and among those people, seven in 10 are women.

“We’re starting to see some signs of what you might call more middle class or people higher up the income scale getting pulled into financial difficulty,” says Peter Tutton, the head of policy at StepChange.

“This is what you’d expect with a huge rise in fuel bills and other costs and most people in work getting below-inflation pay rises.”

View image in fullscreenSally Marshall has taken calls from nurses and teachers on the StepChange helpline. Photograph: Christopher Thomond/The Guardian

It is not hard to see why nurses, who in some of the home nations recently staged strike action, along with millions of others, might be struggling with the cost of living. UK public sector wages increased by 2.7% in the year to October, according to the Office for National Statistics, and 6.9% in the private sector.

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A growing number of StepChange clients are in full-time work

The headline rate of pay rises for all workers excluding bonuses reached 6.1% but when adjusted for inflation, pay for all workers fell by 2.7%, cutting living standards at a time of financial stress.

Indeed, a growing number of StepChange clients are in full-time work, with the charity also seeing a slight rise in the number of homeowners getting in touch, with housing debt expected to be a particular pressure facing households in 2023 because of higher interest rates.

In the run-up to Christmas, an estimated 1.9m households failed to make at least one mortgage, rent, loan, credit card or other bill payment, according to a Which? survey. The most common type of bill missed was energy, at 2.3% of households, followed by council tax at 1.9%.

With rows of spotless desks and phones with headsets, the StepChange office in Chester has the feel of a call centre. However, rather than gripes about poor customer service, the caller explains the events that have brought them to this point of financial crisis: an attempt to reorganise a debt pile stymied by bureaucracy; a family car seized because of an unpaid utility bill.

To better understand the financial pressures caused by the cost of living crisis, the Guardian was allowed to listen to calls – but not to report any personal details.

View image in fullscreenThe debt advisers Sally Marshall (right) and Julie McElroy at StepChange in Chester. Photograph: Christopher Thomond/The Guardian

The average unsecured debt pile is £13,500 and those seeking help must share details of problem credit cards and loans as well as income and spending so the charity can create a budget. However, increasingly this exercise reveals they do not have enough money to live on, let alone spare cash to make repayments.

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These households have what the charity calls a “negative budget”, which means that even after debt advice and budget counselling, their income is not enough to meet their essential outgoings. In 2021 about 27% of the organisation’s clients were in this situation but by the end of 2022 that figure was 33%.

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At the moment, negative-budget clients, as well as people on higher incomes, are the themes showing up in its data because of the cost of living crisis, Tutton says. Negative budgets are a real worry, he says, “because it means we can’t stop their debt problems getting worse”.

Those on higher incomes may have been making minimum monthly payments on loans or credit cards but find it difficult to cope when energy bills become a priority, says Julie McElroy, an experienced debt adviser at the charity.

“Suddenly they’ve got this bill for the gas and electric that’s a priority to pay,” she says. “So then it’s budgeting advice about, well, actually to be able to keep up, you’re not going to be able to pay your credit cards. At the moment they are juggling everything.

“We’re doing a lot more educating to sort of say: ‘Right, well, you’ve got Sky, for example, and might need to reduce that to pay your gas and electric.’ Some people have not had to make those decisions before because they’ve been OK.”

She is worried about the rise of “buy now, pay later” via firms such as Klarna and Clearpay, and predicts an increase in calls about BNPL in January “because I think a lot of people are funding Christmas on it”.

McElroy is also taking calls from people who are not in debt but are frightened about the future. “I’ve spoken to people using candles, who are not putting the cooker on, because they’re scared of the bills. We’re doing more budgets for people who are not in debt but know they will get into debt.”

Loan sharks used to maybe get a mention once a year, and I’ve heard of three in the last two weeksStepChange’s Sally Marshall

Another emerging theme is prepayment meters, as energy suppliers switch struggling households to pay-as-you-go. Callers complain that even after making drastic cuts, they are stymied by high standing charges.

“We’re having really difficult conversations with people where they’re saying: ‘I’m not putting the lights and heating on or using the oven,’ and we’re having to say: ‘You need to heat and you need to eat,’” she says.

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McElroy says that whereas previously a lot of the calls she handled were about credit cards or loans increasingly they relate to housing. Changes to the welfare system have made this cost harder to meet, she says. “You’ve now got the bedroom tax and council tax which before you never had to pay if you were on benefits.”

After a year of coping with higher living costs some people are maxed out. “If you’ve used all your lines of credit, what’s open to you?” McElroy says.

“Loan sharks” is Marshall’s depressing answer. She has handled more calls about the topic in 2022 than in the previous four years. “Loan sharks used to maybe get a mention once a year, and I’ve heard of three in the past two weeks.”

View image in fullscreenJulie McElroy is getting more calls at StepChange from people on benefits who are struggling with their housing costs. Photograph: Christopher Thomond/The Guardian

With the UK heading into recession, mortgages and rent costs rising and the energy price guarantee becoming less generous from April, consumers will come under more financial pressure in 2023, and there is potential for the debt landscape to become very concerning, Tutton says.

“The worry really is that we will see more people who, even after budget counselling, even after they’ve got all the sources of help they can get, will be struggling to make ends meet.

“If we see particular groups getting into difficulty, and more negative-budget clients, then the government will have to think again about how to support the most financially vulnerable to stop people getting in a place where it is not just heating and eating. It’s not being able to do either enough.”

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