One in four Welsh adults showing signs of financial distress

One in four Welsh adults showing signs of financial distress, says leading debt charity

New research reveals many households are struggling to cope financially, with women, younger adults and single parents disproportionately affected.

Nearly a quarter (24%) of Welsh adults are showing at least one sign of financial distress according to new analysis by StepChange Debt Charity. This includes 8% of the Welsh population experiencing severe debt problems, a higher proportion than the UK average (6%).

The figures outlined in StepChange’s Wales in the Red report provide a troubling snapshot of the debt landscape in Wales. Among clients who sought the charity’s help between July 2018 and June 2019 [see notes to editors], the average level of unsecured personal debt was £10,415. Meanwhile, more than half (54%) of clients were aged under 40, despite just 34% of Welsh adults in the wider population falling into this age group.

The most common reasons cited for being in debt were reduced income (16% of new clients), injury or illness (15%), unemployment (12%) and separation/divorce (10%), highlighting a worrying proportion of people ill-equipped to cope with shocks to their income.

The charity has previously voiced concerns after its research found those in Wales are more likely to have been made worse off by income shocks than those across the rest of the UK [see notes to editors]. These new figures add to fears that any future economic turbulence or sharp rises in the cost of living could be disastrous for those already under financial pressure.

Other findings from the report reveal more than half (51%) of new StepChange clients in Wales are in arrears on household bills. The most common form of arrears is for council tax, with 36% clients liable for the bill behind by an average of £984. This is particularly worrying given a significant proportion of council debt is passed to bailiffs, whose often intrusive and costly enforcement practices can increase hardship for struggling households.

Single parents are an overrepresented group among Welsh StepChange clients compared to the general population, making up one quarter of (23%) of those who came to the charity. Of all clients with children who came to StepChange, more than half (54%) were single parents, double the proportion (27%) of single parents in the wider Welsh population. The relatively high incidence of single parents may explain why women (60%) make up a higher proportion of new StepChange clients than men (40%).

Phil Andrew, Chief Executive of StepChange Debt Charity, said:

“This report sends a clear message to policymakers both in Wales and in UK central government: the time to act on problem debt is now. Many of our clients have already reached breaking point, but many more households across Wales are vulnerable to any future economic uncertainty. If they are to keep their heads above water, we need to see provisions put in place for those struggling with debt, so they get the help and protection they need to recover.

“More positively, we are delighted that the new statutory breathing space and debt repayment plan schemes will be available for people in Wales when they come into force. The challenge to the Welsh Government is now to get implementation over the line as quickly as possible.”

StepChange is calling on the Welsh government to work with the charity, and other sector partners, to improve the help and protection those in problem debt receive by:

• Making council tax debt recovery fairer; working with local government to deliver the fair and compassionate debt collection practices that financially vulnerable people need and reduce bailiff use. StepChange is urging Assembly Members to join the call for independent bailiff regulation.
• Helping the Welsh Government to implement free-to-client debt advice. StepChange looks forward to working with policymakers to ensure everyone in Wales can get the advice they need at an earlier stage, before debt problems can cause serious harm.
• Improving household financial resilience and reducing vulnerability to debt in Wales by encouraging those who are eligible to take up of the Help to Save scheme. This will form part of a strategy to build up households’ emergency savings buffer.
• Continuing to build alternatives to harmful high cost credit and reduce the need for people to use high cost credit for essential bills.