Press Release

Rising Cost Of Living Increasing Scottish Debt Problems

23 September 2008

Increasing pressure on household budgets caused by steep rises in everyday living costs is making it harder for those with money problems to repay their debts according to a new report published today (September 23) by Consumer Credit Counselling Service (CCCS) Scotland.

Summarising the report, Malcolm Hurlston chairman of CCCS Scotland warned that rising costs are likely to push people over the edge into bankruptcy. He said:

"Given the level of anxiety surrounding the credit crunch, I would have expected any report focusing on debt to reveal worrying trends. However, the number of people seeking help from CCCS Scotland has fallen over the past five years, along with their levels of debt. At first glance this suggests an improving landscape as far as debt is concerned but, in fact, this reveals two underlying trends that are increasing levels of debt stress for Scottish clients.

"Perhaps the most striking trend of this report is the enforced tightening of purse strings caused by recent inflation. As recently as 2006, the average client was left with about £174 with which to repay debts once the cost of everyday living had been taken into account. This has fallen sharply to just £100 for the first eight months of 2008. Levels of debt may have declined, but rising prices for many essential goods mean that debt problems are likely to get worse.

"Secondly, the drop in average outstanding debt has been driven by an increase in the proportion of clients from low income groups. In 2008, 38 percent of clients had annual incomes of under £10,000, compared with less than a quarter (24 percent) in 2006. Despite lower debt levels, it is those on low incomes who have the biggest challenges in repaying debts, facing the highest ratio of debt to income.

"It is clear from this report that despite decreases in levels of borrowing, more people are being forced into over-indebtedness by increases in the cost of everyday living."

The report examines the circumstances of Scots in debt over the last five years. The information is drawn from almost 12,000 (11,876) people who had an in-depth counselling session between 2004 and August 2008 with CCCS Scotland, an independent charity working with the UK’s Foundation for Credit Counselling.

The main findings of the report were:

* The amount of money available to repay debts is falling for Scottish clients: this year on average clients were left with just over £100 once living costs had been accounted for, compared with £174 in 2006.
* Although those who earn more tend to have higher levels of debt, it is low earners who face the most severe debt problems. Those earning under £10,000 per year had an average debt to income ratio of 31:1 in 2008, compared to an overall average of 21:1.
* Average debt levels have fallen across all age groups, and remained largely stable across income groups.
* In the first eight months of 2008, the average outstanding debt of CCCS clients was £18,769, a decrease of over £5,000 on 2007. This has been driven by CCCS’ success in reaching clients with low incomes.
* CCCS sees slightly more women than men; over half the people counselled in 2008 were over 40.

Copies of Debt in Scotland are available from the CCCS press office, or alternatively click here for a downloadable PDF version.