Cost of living increase becomes second most cited reason for debt among StepChange clients

The cost of living increase became the second most cited reason for debt among new clients of the debt charity StepChange in April 2022, according to its monthly client data report for that month¹. A growing proportion of clients, 15%, cited a cost of living increase among their main reasons for debt, compared with just 7% of clients in September 2021¹.

Fewer clients accessed full debt advice in April 2022, at 12,500, compared with around 15,000 in March, although StepChange said this represented a similar seasonal trend also found in 2021, with each individual month in the first quarter of each year seeing more clients needing debt advice than in April¹. An increased proportion of clients were in receipt of Universal Credit in April, at 34%, compared with 32% in March¹.

Around one third of clients, 32%, were in a negative budget at the time of advice in April 2022, up by three percentage points compared with the same month in 2021, when the figure was 29%¹. The proportion of new clients behind on the most common unsecured debt types such as credit cards, catalogues and payday loans fell in April compared with previous months, and the proportion of clients with household arrears such as council tax also decreased, although energy arrears levels continued to slowly increase¹.

Later Scottish government analysis of the wider evidence on the cost of living crisis and problem debt, published on 20 December 2024, reported that 25% of new UK StepChange clients cited the cost of living in 2023, an increase of seven percentage points compared with 2022 and 19 percentage points compared with 2021, when the figure was 6%². It was also cited by 25% of new Scottish StepChange clients in 2023, an increase of 2% since 2022².

The same review reported that across the UK StepChange clients had £14,654 of debt in 2023, up from an average of £11,000 in 2021, while average unsecured debts among Scottish StepChange clients rose from £12,730 in 2021 to £16,337 in 2023². Client average arrears increased 30% between 2019 and 2023, the highest level over the past five years². It also found that one in three UK new clients, 32%, had a deficit budget, up from 30% in 2022, and that in Scotland this rose from 27% of clients in 2022 to 31% in 2023².

The review noted that figures from debt services will not reflect people in debt who do not seek advice, citing FCA research showing that only 21% of adults who felt heavily burdened by their debts and 29% of adults who had fallen behind on or missed paying their bills sought help in the last year². It also set out caveats around the data, including that some services measure numbers of new clients only while others measure both new and existing clients, and that figures may be underestimates because not everyone who needs advice will have been able to access services².

Why it matters for households

The April 2022 figures cover new clients who first received debt advice from StepChange in that month, so they describe the circumstances of people already seeking help rather than the wider population¹. The share citing the cost of living as a main reason for debt rose from 7% in September 2021 to 15% in April 2022, and the charity's later UK-wide figure for 2023 was 25%². Over the same period the amounts owed by clients rose: average UK unsecured debt went from £11,000 in 2021 to £14,654 in 2023, and average Scottish unsecured debt from £12,730 to £16,337².

The proportion of clients in a negative budget, meaning their income did not cover their outgoings at the time of advice, was 32% in April 2022, up from 29% a year earlier, and 32% of UK new clients in 2023, up from 30% in 2022². For households in that position, the review describes running down savings where they exist or going further into debt each month². The review also reports that 21% of people had borrowed to pay for essentials in the last six months, and that 59% of new clients of Christians Against Poverty in 2023 had an equivalised income below the poverty line².

The figures do not cover people who do not approach a debt advice service. The review cites FCA research that only 21% of adults who felt heavily burdened by their debts, and 29% of those who had fallen behind on or missed paying bills, sought help in the last year, which it attributes to reasons including shame and stigma, wanting to resolve problems independently, mental health difficulties and other vulnerabilities². It also notes that debt advice services are overstretched and dealing with increasingly complex cases with lower volunteer numbers, so some figures may be underestimates².

For anyone assessing their own position, the Standard Financial Statement and Common Financial Tool is the budgeting framework used in debt advice to set out income, outgoings and what is available for repayments. The guide to debt help, solutions and rights sets out the options and the protections that apply.

What happens next

StepChange publishes monthly client data reports, with the April 2022 report covering new clients who first received debt advice in that month¹. The Scottish government review was published on 20 December 2024 and draws on debt advice service data up to 2024, including StepChange UK monthly client data for April 2024 showing 16,046 new clients seeking debt advice, 11% higher than April 2023². No further dated steps are set out in the material.