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People 'trapped in debt' as cost of living crisis escalates

People in debt are facing the prospect of being “trapped” by an escalating cost of living crisis, a new report from CAS has found.

The report looks at the experiences of almost 3,000 complex debt clients receiving help from the CAB network. A complex debt is where someone has multiple debts to different creditors or a single liability which requires specific legal or administrative work.

Looking at the experiences of clients from spring 2021 to spring 2022 it found:

  • An increase in clients in deficit every month from 42% to 48%, so more clients are paying more out than they are bringing in each month
  • 1 in 2 complex debt clients have no money to pay down their debts after covering essentials
  • A reduction of £80 in monthly disposable income for those clients who did have it, from an average of £228 in 2020/21 to £148 in 2021/22
  • A huge increase of people taking longer to clear their debts, with a 65% increase in people taking 5 to 30 years.

CAS said the findings reflected that the cost of living crisis impacted people in debt far sooner than the rest of the population, with clients struggling with finances in over the past year, before significant rises in inflation or energy bills.

It also highlights the impact of the decision to reduce Universal Credit by £20 per month in October 2021, with people reliant on the benefit seeing their disposable income plummet.

Commenting on the report, CAS Financial Health spokesperson Jemiel Benison said:

“People in debt face the prospect of being trapped into longer repayment periods because of the cost of living crisis. The findings of this report are shocking and should have policy makers considering what more support can be made available.

“What we see is more people with no money left every month not able to pay down their debt – so facing longer periods to clear it. Those with disposable income every month have seen a huge drop, just as prices and bills soar.

“This data is from spring 2021 to earlier this year – so people in debt were already feeling the impact of the cost of living crisis. If the worst is to come in terms of inflation or a recession, that is very worrying indeed.

“What is also clear is that the decision to cut £20 per week from Universal Credit has had a devastating impact on those in debt. It reiterates the essential need to uprate benefits in line with the cost of living at least.

“People feeling worried about their finances can always turn to the Citizens Advice network for help. Our advice is free, confidential and impartial and can deliver real results. We never charge people for advice and we don’t judge, we just help.”