Help is at hand for customers nearing ‘debt time-bomb’

Debt Awareness Week has never been more relevant, as the pandemic continues to plunge increasing numbers of families and businesses into financial hardship. Mark Abrams, chief executive of Auriga Services, looks at what the utilities sector has been doing to help.

Since the start of the pandemic last year, UK debt has risen at an astronomical rate. The net debt level has soared to its highest since 1960, and personal debt attributable to the virus has snowballed to a worrying £10.3 billion, with more than half of adults in low-income families borrowing more to cover every-day costs.

Unemployment and furlough are no doubt causative factors to this debt – the number of employees on the UK payroll is now down by more than 782,000. Well-known high street names have gone out of business, while others, such as British Airways – which axed 12,000 jobs in a single day – have been forced to shed whole chunks of their workforce.

Those still in the ‘safety net’ of the furlough scheme – 4.7 million people as of January 2021 according to HMRC – have also been struggling to cope on the reduced income. The knock-on effect has been devastating for an untold number of families, heralding what charities are now describing as a future ‘debt time-bomb’.

Families in Distress 

Lockdowns forcing people to stay at home have also meant that rocketing numbers of families have fallen behind with household payments like rent, council tax and increased energy and water bills. An estimated 3 million people are in arrears with their water bill, while 2.8 million people have fallen behind with their energy bills.

Cancellations of direct debits are running at three times their normal levels for domestic suppliers and ten times for non-domestic suppliers – a situation which presents a worrying issue for water and utility companies in terms of cash flow and the inevitable bad debts.

Vulnerability is also on the rise – between March and October 2020, the number of people with vulnerable characteristics has increased to 27.7 million, encompassing 53 percent of all UK adults, according to a Financial Conduct Authority (FCA) survey.

So, what can be done to help the vulnerable from plummeting into a financial abyss from which it is incredibly difficult to escape? Fortunately, there has been an unprecedented set of government and charitable interventions which are mitigating some of the social and economic effects of the coronavirus crisis.

Offset debt 

The utility sector itself has responded in a positive manner to the pandemic, instituting a number of initiatives to help offset the debt situation. Providers are deferring payments and suspending shut-offs to lend support to communities in need.

British Gas, for example, will not chase debts or report defaults to credit reference agencies as a result of hardship from Covid-19, while Ofgem has said that no credit meters will be disconnected during the outbreak.

Some water companies are now contributing greater budgets for customer support schemes – so, for example, a low-income family meeting the criteria could be eligible for a reduction between 10 and 90 percent off their water bills for a full twelve months.

If households, or businesses, find their finances are affected by Covid-19, they should ask their creditors for a breathing space, speak to their utility company, prioritise their debts and get debt advice tailored to their individual circumstances.

Case-by-case basis 

To counteract the effects of the pandemic, Auriga Services – which since being set up in 2004 has helped over 2.2 million people – has rapidly adapted to a new working environment, expanding the list of advice topics it offers, introducing new assistance schemes and assessing higher volumes of individuals on a case-by-case basis.

This financial year, Auriga supported over 137,000 people in vulnerable situations, assisting with increased water and energy costs, as well as benefits advice, but also offering a listening ear to people who were isolated from family, community and access to support.

Although the vaccine roll-out appears to be stemming the outbreak, the aftermath of Covid-19 will be with us for many months yet and that, sadly, is why Auriga is predicting that families and individuals will continue to see utility bills mount up and, potentially, become unaffordable.

During the last nine months, we have seen a rapid increase in the number of new projects to manage emergency fuel payments – introduced directly to support households which cannot afford essentials such as food and heating. To put this increase in perspective, April 2020 saw Auriga issue 1,695 emergency fuel vouchers, valued at a total of £45,698; by February 2021, this number had surged to 13,117 vouchers worth £702,377.

Three million healthy households 

Going forward, we plan to partner with more of the UK’s utility companies and other like-minded organisations to deliver our growing programme of helping people to become more financially stable by taking them out of fuel poverty, and achieving their aim of helping 3 million households by 2030.

Whilst building on current partnerships, Auriga is constantly expanding to work with new clients who specifically want to increase their efforts on topics like income maximisation, tariff switching and emergency hardship measures. We are currently nearing the completion of a bespoke Priority Services Register which, when finalised, will offer more extensive support to those most vulnerable.

In direct response to the growing need for access to information and self-serving support, Auriga is launching its own consumer-facing website and brand next month – “Ask Bill”. Ask Bill will provide a platform for customers to easily search for the support available to them from their water and energy company, to find hints and tips to reduce the outgoings, and access tools to check if they are receiving all the benefits they are eligible for.

Whilst the immediate future is still fraught with worry and uncertainty, the message to both businesses and households is that there is help out there – and it needs to be shouted about.