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Millions face winter of debt as energy costs heat up

·3-min read
Before the recent spike in inflation and the related hike in gas prices, households owed a total of £510m – a rise of £77m in 12 months (PA)
Before the recent spike in inflation and the related hike in gas prices, households owed a total of £510m – a rise of £77m in 12 months (PA)

Three million households will enter the winter months owing money to their energy supplier, half a million more than last year and almost a million more than faced the same situation in 2019.

Almost 60 per cent of households report concerns about how they will meet payments this winter, and a fifth will continue to leave their heating off to keep bills down, according to data from Uswitch.

But the data covers the second quarter of 2021, which means that even before the recent spike in inflation and the related hike in gas prices, in particular, households owed a total of £510m, a rise of £77m in 12 months.

The Money Charity calculates that households in the UK spent £120.5m a day on water, electricity and gas, or £4.33 per household per day over that period.

Of the 13,000 people who approached the StepChange Debt Charity in September – once again preceding the latest hikes in bills as well as the reduction to universal credit – a “rising proportion” were experiencing arrears on their energy bills. The charity’s gas and electricity arrears information pages saw a 388 per cent monthly increase.

Despite some welcome measures in the recent Budget, StepChange anticipates that the pressures on the lowest-income households experiencing problem debt will remain acute heading into winter.

Given the inflation arising from the cost of essential goods such as food and energy, the charity is worried that many poorer households in debt will not be able to make ends meet over the coming months, and will turn to borrowing more or falling behind on bills in an effort to meet their essential needs.

Peter Tutton, StepChange head of policy, research and public affairs, said: “Clients who turned to us for help in September were already exhibiting some alarming warning bells about the cost pressures now emerging, such as energy prices, that risk forcing more lower-income households into debt over the coming months.

“The government and regulators need to be attuned to these risks, and ready to take further steps to help alleviate pressure if we are to avoid a rising debt crisis, especially among lower-income households.

“The latest Bank of England borrowing data out today shows a net increase in consumer credit, driven by rising borrowing on credit cards. While this isn’t necessarily reflective of a cost of living squeeze, we do know that people often turn to credit cards to make ends meet – they are the most common form of debt among StepChange clients.”

Debt charities like StepChange provide guidance for people experiencing financial difficulties and National Energy Action offers advice on energy bills and keeping warm at home.

There is also extra help available for vulnerable consumers through schemes like the winter fuel payment, cold weather payment and the warm home discount.

Justina Miltienyte, energy policy specialist at Uswitch.com, said: “No customer should have to choose between heating or eating and it’s alarming that many households are facing that decision this winter.

“Anyone who is worried about their energy bills, or their existing debt, should contact their energy supplier in the first instance to see if they can set up an affordable repayment plan.

“There are also many charities and organisations set up to provide support, so it’s important to do your research and see what help is out there and available to you.

“Other support might be available for customers struggling with their bills. Warm home discount applications are still open with almost all of the suppliers which were involved last year. Eligible customers can receive £140 off their energy bills, so we would encourage anyone to check to see if they might be entitled to this payment.”

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