CAB, the Citizen’s advice bureau has estimated that UK households have a hidden debt mountain of almost £19bn. This is thought to be the amount households owe in missed council tax payments, utility bills and overpaid benefits.
The charity say that missing bill payments has overtaken worries about spending on credit cards and has become the key money concern for consumers.
Last year the CAB helped more than 690,000 people over their troubles with paying household bills. Using this as part of the estimate and also using government records about the amount owed to the government and utility companies, such as electricity and gas and water rates as well as unpaid taxes and fines it has come up with the cost of hidden debt to UK households as £18.9bn.
Concerns have already been growing over personal borrowing on credit cards, loans and overdrafts which have reached higher levels than before the financial crisis. The Bank of England keeps track of how much is being borrowed from high street banks but official figures do not exist for the amount owed to missed bill payments.
Whilst recent figures showed that consumer borrowing reached £213bn in June, a rise growing faster than wages, missed bill payments, estimated by CAB to have risen by 34% since 2010, were not included.
Many households are struggling with increasing debt. Higher inflation has pushed up the cost of living and benefit cuts have added to problems for many households who relied on tax credits to get by. Many are having to repay overpaid tax credits.
Most of this debt pile, uncovered by the CAB, shows the vast majority related to bills owed to the state. Households owed more than £10bn last year in tax credits and benefits where the government had overpaid them and then demanded repayment, while councils were owed almost £3bn in council tax arrears. Water Companies were owed £2.2bn and electricity and gas companies were owed almost £1.1bn as consumers fell behind with their bills.
The consequences of falling behind with household bills can be worse than racking up personal debt. Some consumers may find themselves having their utility services cut off or being evicted if they cannot keep up with rent payments. Jail can be a consequence of missing council tax payments.
This leads to a knock-on effect for mental health and can lead to more borrowing to pay bills. Money troubles are one of the leading causes of mental health problems, it was revealed recently.
Gillian Guy, the chief executive of Citizens Advice, said: “There is an air of institutional indifference as far as household bill debts are concerned. The government must get a grip on the scale of this debt by accurately measuring and publishing the figure on an annual basis.”
A spokesman for the Treasury said the government was helping households by cutting taxes and increasing the minimum wage. The government has committed to introducing a breathing space scheme for people struggling with problem debt.
“This will help those overwhelmed by debt by giving them the time they need to get their lives back on track,” the spokesman said.