Energy bills force one in four into ‘debt trap’

One in four Scottish households have ignored utility bills because they couldn’t afford to pay them, sending them deeper into arrears with energy suppliers, new figures show.

More than 170,000 Scottish households owe money to at least one utility provider, according to research by Debt Advisory Centre Scotland. Those in arrears have either missed entire payments or managed only to pay off a portion of their bills.

The research is published as households are hit by yet more energy bill increases. Energy minnow Ovo this week raised the cost of its cheapest plan, the New Energy Fixed tariff, by an average of £68 to £1,240 a year. Customers on its variable tariffs will be hit too, with prices going up by 6.5 per cent on 20 May.

Its move came a day after Co-op Energy announced it would be increasing gas and electricity prices by 8.5 and 9 per cent respectively, on 9 May. It cited escalating supply costs, prompting speculation that other suppliers could be set to raise prices.

Such increases would send even more Scottish households spiralling into debt difficulties, piling the pressure on those struggling in the face of low wage-inflation, higher living costs and the effects of government spending cuts.

Ian Williams, of Debt Advisory Centre Scotland, said: “It’s deeply worrying that so many Scots can’t afford the necessities like heat and lighting. And it’s hard to imagine any improvement in these figures – with utility costs on the rise and households everywhere dealing with changes to the benefits system, it’s a problem that looks like it’s here to stay.”

The number of people in arrears on household bills is already climbing rapidly, StepChange Debt Charity Scotland told The Scotsman.

Four in ten of its clients are behind on bill payments, up from 31 per cent in 2010. The average amount owed on gas bills has jumped by £43.84 to £427.35 over the past 12 months, while the average electricity arrears balance has  increased by £51.35, to £494.70.

Sharon Bell, head of StepChange Debt Charity Scotland, called on energy suppliers to do more to help struggling families.

“As this cold snap finally comes to an end energy companies must show that they understand the difficult situations many of their customers find themselves in, particularly given successive price hikes and projected increases,” she said.

“Nobody wants to avoid an essential bill, but unemployment or part-time work combined with low wage-growth, rising prices and a future of declining benefits is already forcing many vulnerable families to make difficult financial choices.”

The implications of falling behind on energy payments can be severe, with suppliers quick to crack down and often move debtors onto more expensive tariffs.

Williams added: “If possible, the most important thing to do in this situation is to carry on paying for your usage. There can be negative consequences from your utility provider if you fail to do this.

“You then need to look at your budget and figure out how much you can pay on top of your usage towards your arrears. Offer this to your utility provider. Even if they don’t accept this amount, pay it anyway – as it will show them that you’re willing to try to work things out.”

And don’t hesitate to seek advice if you’re struggling, said StepChange’s Bell.

“Anyone who feels under pressure from debt, or who is trying to ignore it, should take control and seek free or anonymous help from a debt charity immediately.”

Scots are being forced to dig deeper into their savings just to cover their essential living costs, leaving many at risk of being destitute in retirement. Pensioners in particular are having to dip into their nest eggs just to get by, according to research out today from Skipton Building Society.

Almost half of Scots who pay into an individual savings account (Isa) have taken money out of it, including a quarter who have done so up to four times over the past 12 months, it found. One in four who accessed their savings used the money to pay for shopping, unexpected bills or energy costs. Another 7 per cent said they needed it to supplement their pension.

Stacey Stothard, corporate communications manager at the Skipton, which has six branches in Scotland, said people approaching and living through retirement were finding it particularly difficult financially. “They have made wise choices in taking advantage of tax-free savings, putting their well- earned money in to Isa accounts. But they are now finding that the cost of living has sadly increased too.”