A report has revealed a huge increase in energy debt among UK household, along with a big rise in council tax arrears, as more than a million UK households owe money to suppliers
The number of households in energy debt has more than tripled since 2012, research has revealed.
Soaring energy prices, combined with the wider cost of living crisis, has left more than a million households owing money to suppliers and now arrangement to pay the money back. It comes as energy bills are set to rise again from October, with addressing the strain on household finances one of the big challenges facing the government.
A report from think tank the Resolution Foundation found the number of customers falling behind on their electricity bills, and with no repayment plan in place, has more than tripled from 300,000 in 2012 to over one million at the end of 2024. The number of customers falling behind on their gas bill has also tripled from 300,000 to 900,000 over this period.
The size of their debts has also surged, with the average for electricity leaping from £500 in 2012 to £1,600 last year, and gas from £500 to £1,400. The ‘Money on my mind’ report says 13 million working-age families across the poorer half of Britain still struggle to save, with over two-in-five having less than £1,000 in liquid savings.
It also identifies new financial worries for families in the form of rising council tax arrears. Since the start of the Covid pandemic, council tax arrears in England have risen by almost half, from £4.6billion to £6.7billion.
But the research highlighted some positive trends among low-to-middle income households, who are seeing falling credit card debts. Overall levels of consumer debt among the poorer half of families have dropped since the 2008 financial crash. The average amount owed by all these families has fallen from £2,617 in 2006/08 to £2,256 in 2020/22 – a real-terms fall of 14%. But the decline is less than the 21% fall among higher-income households over the same period.
Felicia Odamtten, economist at the Resolution Foundation, said: “Families’ financial resilience has been tested in recent decades by a series of financial shocks along with stagnating incomes. While families have impressively still managed to reduce their credit card debt and save a bit more, new financial worries have emerged with arrears on priority bills skyrocketing.
“Tackling these financial problems will require additional help with priority bills, such as improved council tax support, and a social tariff on energy bills. But all too often, lack of financial resilience is simply a consequence of lack of income and addressing this will mean fixing Britain’s dire record on productivity and real wage growth.”
Simon Trevethick, from the charity StepChange, said: “This research speaks to what our advisors see on a daily basis – that the sheer weight of everyday costs is pushing households to the brink. We know that the cost of living has made the prospect of saving for a rainy day increasingly difficult – our polling found four in 10 UK adults (22 million) would not be able to meet all of an unexpected £1,000 expense without borrowing.
“With over two in five StepChange clients in energy arrears, averaging over £2,300, this is one of the most pressing issues they face. For council tax, we see increased levels of harm as the risk of debt escalation and outdated threat of imprisonment loom large over those in difficulty – with average debts topping £2,000.”