Energy arrears overtake council tax as most common…

Energy arrears overtake council tax as most common debt issue

Three of the UK's best known debt charities have joined forces to urge Ofgem to urgently increase protection for people with mounting energy bills. The news comes in the wake of speculation that household energy bills could rocket to £500 a month in January 2023, amid Russian threats to cut Europe's gas supplies.

Citizens Advice, the Money Advice Trust and StepChange Debt Charity have warned the October price cap rise will have a "disastrous impact" on the finances of millions of households, and said that energy arrears are now the most common type of household debt.

Ofgem's price cap rose by 54 per cent to £1,971 per year in April, and the expectation is that the upcoming price cap review next week will mean average bill of £3,244 in October, and potentially nearly £4,000 by next January. The charities fear that families will be forced into self-rationing or disconnecting from their energy all together, and are worried about the potential impact this could have on many people's physical and mental health, according to This Is Money.

In the first three months of the year, before the latest price rise kicked in, a third of callers to National Debtline had energy arrears, while the total number of people seeking energy debt advice from Citizens Advice was 64 per cent higher than 2019.

The average level of energy arrears amongst callers to StepChange Debt Charity has also risen by a third in the past two years from £1,056 in 2019 to £1,399 in 2021. All three charities reported that energy arrears had overtaken council tax as the most common debt type amongst people asking them for help.

And while the charities welcomed the Government's package of financial support, they have written a letter to the chair of Ofgem, urging the energy regulator to take more action, asking for more guidance to energy companies to ensure people who fall into arrears are treated fairly and are not asked to repay amounts they cannot afford. The firms are also calling for more protection for customers in financial difficulty from potentially harmful debt collection practices.

Phil Andrew, chief executive of StepChange Debt Charity, said: 'The cost of living is now the most common reason for debt among new StepChange clients, something we expect to continue over the coming months. That's why it's essential that Ofgem, alongside Government and energy companies, does all it can to help people navigate this difficult period. We look forward to working closely with them to implement the recommendations we have outlined.'

Dame Clare Moriarty, chief executive of Citizens Advice, added: 'Families we're supporting are already facing stark choices because of mounting bills. Some are turning off fridges and freezers because they can't afford the running costs; others are washing their kids' clothes at their grandparents' because they're already in the red. The Government needs to be ready to act again, but Ofgem has a crucial role to play. It must ensure suppliers aren't chasing people for debts they can't pay or forcing people onto prepayment meters when they're struggling to cover their bills.'

Joanna Elson CBE, chief executive of the Money Advice Trust, concluded: 'Government support to help with energy and cost of living price rises is welcome, but the challenges facing many people are set to become more acute with another substantial increase in the energy price cap coming this autumn. At National Debtline and Business Debtline, we are hearing from more and more people struggling to afford soaring energy bills.

'We are calling on the regulator to ramp up protections to ensure energy firms treat people struggling to pay or already in energy arrears fairly, including halting potentially harmful debt collection practices. We look forward to working with Ofgem to make these recommendations a reality as soon as possible.'

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