Debt costs hit £900m

Govt strategy slammed by NAO

THE UK economy is losing £900million a year because the Government doesn’t realise the true scale of the British debt disaster.

In a new report, the National Audit Office estimates that the increased use of public health and housing services by people with problem debt costs taxpayers an additional £248m a year and around £900m to the economy as a whole. The NAO said problem debt, defined as the inability to pay debts or household bills, affects around 8.3 million Brits and can increase people’s likelihood of being in state-subsidised housing. It is caused by many factors, including access to affordable credit. It can also cause anxiety and depression. The NAO added that an estimated four in 10 people in the UK cannot manage their money well, with people across the UK owing at least £18billion to utility providers, landlords, housing associations and government, such as through council tax arrears.

The NAO said the Government had an “insufficient understanding” of and a weakness in the strategy for dealing with problem debt. There were gaps in government data which meant it is not possible to calculate some other impacts, including on employment and benefits.

Amyas Morse, head of the NAO, said: “Problem debt has significant consequences both for individuals and the taxpayer. While government has made progress in seeking to address this issue, its attempts so far have been insufficient.

“The Treasury needs a better understanding of the scale of people’s debt problems and how it is impacting their lives and the taxpayer so it can effectively resolve the problem.” The report also criticised aggressive debt collection for putting additional pressure on people in arrears.

StepChange Debt Charity chief executive Phil Andrew said: “The National Audit Office hits the nail on the head. Poor debt collection practices that fixate only on getting as much money back as quickly as possible are counterproductive and ultimately harmful.”