Negative budgets among new clients reach a 12-month high

StepChange, a debt charity, provided full debt advice to around 13,500 new clients in February 2022, according to its monthly client data report published that month¹. Of those new clients, 32% had a negative budget at the time of advice, a higher proportion than at any point in the previous 12 months¹.

The February total was around 500 clients fewer than the 14,000 who received full debt advice in January 2022, and well below the around 15,700 clients advised in February 2021¹.

The report points to continued signs that the cost of living is affecting households¹. Experiencing a cost of living increase was the fourth most commonly cited reason for debt, at 11%, up two percentage points from 9% in January¹. Needing credit to cover living expenses was the sixth most common reason, at 7%¹. The proportion of clients who had fallen behind on energy bills also rose compared with the previous month¹.

The charity continued to advise a high proportion of clients with children, who accounted for almost half of all new clients in February at 45%, including one quarter, 24%, who were single parents¹.

Why it matters for households

A negative budget means a household's essential outgoings exceed its income, so there is nothing left over and debts cannot be repaid from current income without a change in circumstances. On StepChange's figures, close to a third of the people who sought full debt advice in February 2022 were in that position when they were advised¹.

The report covers people who had not previously received full advice from the charity, so it describes the circumstances of households arriving at debt advice rather than the whole population. The share with a negative budget was the highest in 12 months, and the reasons clients gave for their debt included a cost of living increase and needing credit to cover living expenses¹. The charity also reported a month on month rise in the proportion of clients behind on energy bills¹.

Families with children made up 45% of new clients, and single parents 24%¹. For those households, a negative budget at the point of advice indicates that income was already failing to cover essentials before any debt repayment was factored in.

What happens next

The report gives no forward guidance and no dated next steps. StepChange publishes monthly client data; the February 2022 report is the latest in that series¹.