Insights ¦ Drowning in Debt briefing

Key Take Aways

1. The UK faces a looming debt crisis exacerbated by economic instability, rising living costs, and social vulnerabilities.

2. Over two-thirds of Christians Against Poverty (CAP) clients delay seeking debt help for over a year, with a quarter waiting more than three years.

3. Social issues such as mental health decline, family breakdown, domestic abuse, and social isolation are both causes and consequences of poverty, creating complex cases for debt advice.

4. Public service cuts, welfare reductions, and declining charitable support are weakening the social safety net for low-income households.

5. Low-income households are experiencing stagnant incomes against a backdrop of over 20% inflation in essentials like food and energy, reducing real purchasing power.

6. Many households borrow or default on bills due to rising costs, leading to increased debt levels, with energy debt more than doubling in three years.

7. Almost half of CAP clients are living with a deficit budget, often lacking approximately £283 monthly, which leaves them vulnerable even after receiving debt advice.

8. The rise in debt-related insolvencies, including Debt Relief Orders and Bankruptcy, highlights increasing financial precarity and diminishing asset bases among vulnerable populations.

9. Funding for debt advice services is decreasing, with traditional Fair Share contributions dropping by over two-thirds since 2019, threatening service sustainability.

10. Face-to-face, community-based debt advice remains crucial for vulnerable clients, addressing both financial and emotional needs beyond what remote services can offer.

11. Building financial resilience is highly challenging for low-income households, with many unable to save or buffer against unexpected financial shocks.

12. Policy recommendations stress increasing funding, enhancing access to liveable incomes, and co-developing services with vulnerable communities to address the current crisis.

Key Statistics

• Over 66% of CAP clients waited more than a year before seeking debt help; 23% waited over three years.

• 47% of CAP clients had gone without food; 72% without healthy food; 43% without hot meals in 2024.

• Inflation in essentials like food and energy increased by over 20% in three years.

• The average UK household energy bill increased by 43%, reaching £1,849, from 2019 to 2024.

• 54% of CAP clients had gone without heating their homes in the past year.

• 47% of CAP clients had a deficit budget in 2024, with an average shortfall of £283 per month.

• Energy debt has increased by 118% over three years, though household energy debt levels have only risen marginally.

• The proportion of CAP clients opting for insolvency options increased, with Debt Relief Orders (DROs) rising as bankruptcy declined.

• CAP’s income from Fair Share funding dropped significantly, from £660,000 in 2019 to £175,000 in 2024.

• Increasing complexity of vulnerability issues is delaying case progression; almost half of CAP clients have considered or attempted suicide pre-help.

• 96% of CAP clients report being unable to save money due to debt circumstances.

• The share of clients repaying debts through Debt Management Plans (DMPs) decreased from 37% in 2019 to 24% in 2024.

Key Discussion Points

• The UK’s debt environment remains volatile with increased social and economic pressures impacting low-income households.

• Delayed help-seeking results in more severe debt problems and heightened vulnerability.

• Rising inflation and stagnant incomes sharply reduce passive resilience among the most marginalised populations.

• Essential costs, including food, energy, rent, and transport, are rising faster than incomes, forcing households into unsustainable borrowing.

• Low-income households are increasingly resorting to borrowing and default, deepening their debt burdens.

• Vulnerability levels have risen, with many clients facing complex, multi-layered social and financial issues.

• The advice sector is experiencing capacity strain due to rising complexity and reduced funding.

• Face-to-face community-based advice is vital for vulnerable clients, providing emotional support alongside practical debt resolution.

• Building financial resilience is exceptionally difficult for those on the lowest incomes, often resulting in the inability to save or buffer against shocks.

• Funding reductions threaten the sustainability of debt advice services, risking increased disconnection for those in need.

• The surge in insolvency cases reflects deepening financial hardship and dwindling asset bases among the most vulnerable.

• Policy proposals emphasise the need for increased, sustainable funding, improved income support, and service co-design to better serve at-risk populations.

Document Description

This article offers an in-depth briefing on the escalating debt crisis within the UK, examining economic, social, and systemic factors. It highlights the critical importance of sustainable, face-to-face debt advice and support services for vulnerable populations. It presents key statistics and insights into the rising cost of living, social vulnerabilities, and the decline in funding for debt advice organisations. The article underscores the urgent need for policy intervention, increased investment, and community-based approaches to prevent the most vulnerable from being overwhelmed by mounting debt and social pressures.