Debt crisis warning amid sharp rise in bills and food price inflation

Sharp rises in energy bills and the highest food price inflation in a decade are contributing to a significant fall in real incomes for all Scottish households, according to a new report.

A study from the Scottish Parliament’s Social Justice and Social Security Committee found the situation is creating a growing debt crisis for people on low incomes.

The Committee’s report says both the UK and Scottish Governments should be using their learnings from the pandemic and economic crisis to develop a way of distributing emergency funding in a fair and timely manner.

Debt and money advisors are often a lifeline for people with low incomes and debt problems, however, the report highlights the pressure advisors face, with many services now stretched to breaking point.

Elena Whitham, Convener of the Social Justice and Social Security Committee said: “Our inquiry has exposed the severe challenges faced by households on low incomes across Scotland.

“We have heard startling testimony about how increasing numbers of people, who have even less money due to the rising cost of living, are being pushed into debt.

“The fact is, people are in debt right now and things will only get worse. Urgent action must be taken to help protect people on the lowest incomes, who are already having to make impossible decisions about how ever more limited budgets should be spent.

“We have also found that public bodies have a quicker and harsher approach to debt collection, for example with council tax, and are falling behind consumer creditors.”

Charlene Kane from Denny and Dunipace Citizens Advice Bureau outlined how challenging the situation can be.

She said: “It is very difficult to help someone to budget when, in effect, they have no money to budget with and they have no disposable income for us to deal with.

“As a result, we are hand holding with clients more than we ever did. Clients’ cases are staying open for longer periods of time, as we try desperately to find a solution.”

Taking on board the feedback from our experts and evidence shared throughout the inquiry, the report outlines a series of actions needed to tackle the issue of low-income and debt.

Among recommendations for the Scottish and UK Governments are more support targeted at the people who are most in need, greater financial support for debt advice services and the development of a debt management strategy covering all public bodies in Scotland to support their customers.