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Problem Debt Affects 8.3 Million people in UK: NAO

Problem debt, the inability to pay debts or household bills, affects around 8.3 million people in the UK, said National Audit Office (NAO) in a statement on Thursday (6).

An estimated 4 in 10 people in the UK cannot manage their money well day-to-day, and internationally the UK ranks below average in financial capability.


The inability to pay debts can also increase people’s likelihood of being in state-subsidised housing. The NAO estimates that the increased use of public health and housing services by people with problem debt costs taxpayers an additional £248 million a year, and around £900m a year to the economy as a whole. Due to gaps in the government’s data, it is not possible to model other impacts including on employment and benefits, the report added.

People increasingly report problems with debts to government or utility providers. The NAO estimates that the UK public owe at least £18 billion to utility providers, landlords, housing associations and government, such as through council tax arrears or benefit overpayments.

HM Treasury which has overall policy responsibility for problem debt has limited information on debt in these areas and, as such, does not fully understand the problem, which hinders its ability to respond effectively. The information available is much less clear and transparent than retail lending information.

"Problem debt has significant consequences both for individuals and the taxpayer. While the 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," Amyas Morse, the head of the NAO.

HM Treasury is also developing proposals to strengthen statutory protections for people struggling with debt problems. The NAO recommends that HM Treasury should ensure its policies on personal debt are delivered effectively and are drawn to best practice. It must also improve the quality and availability of data from across government on the scale, nature and impact of problem debt on individuals and taxpayers.

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