Households in debt time-bomb, says Citizens Advice

Fears of a "debt time-bomb" have been raised by Citizens Advice, which said growing numbers of households faced a "wild west" when seeking help.

The charity said it is helping more people who do not have enough income to cover essential expenses.

Director of policy Matt Upton said 51% of those it sees with debt issues have negative budgets, compared with 36% before the pandemic.

Mr Upton said there was no sign of that figure coming down.

He said if the trend was "even remotely mirrored" across the UK's wider population then the "simple maths dictates a debt crisis" would follow.

There had been "a time lag" in people seeking help and the government's energy bills support scheme had made a difference but it "wasn't enough to completely stop the bleeding", he said.

Mr Upton said people coming to Citizens Advice having not paid the bills was "nothing new" but clients' use of unsecured credit was at its highest level in four years.

"Arrears on things like rent, utility bills and council tax are much harder to track but our numbers are starting to go in the wrong direction," he added on his blog.

Uprating benefits and pensions by inflation, continued help with energy bills and reducing the cost of childcare would help millions to "better balance the books" but it would not be enough, he said.

The problem when people reach crisis point is made worse he added: "You would hope that what greets them here is a system and set of solutions that will help them get back on their feet, or at worst, not make things actively harder for them.

"The reality is very different. The most apt description is a wild west - search online for options to pay off debts, and you'll be bombarded by profit-seeking firms offering misleading advice about debt solutions which won't help."

Mr Upton called for changes to "make sure the system isn't actively working against them" when people are struggling to pay the bills.

He also called for third-party debt collectors to be brought under a proper statutory regulatory framework.

He said issues around personal finance needed to be pushed up the political "to-do" list.

"No-one has a clue about the size of this debt time-bomb that is about to go off," he added.