Policy interventions that support households in debt from falling further into financial difficulty are crucial in a cost of living crisis.

One London borough commissioned Policy in Practice to evaluate the best ways to provide preventative support for households in debt. This project included 20 interviews with residents who have fallen into debt or arrears within the last year. Their lived experiences illustrated the drivers of debt crises.

We identified three practical and effective service transformations to improve the outcomes of struggling low-income households:

  1. Make the first debt-related contact count
  2. Develop customer-focused services
  3. Inform residents about available council help

Income shocks, illness and rising costs are major drivers of falling into debt

The most common reasons why interviewees fell into debt were sudden changes in income, ill health, and rising living costs. This is typically caused by unexpected job redundancies, business failures, or unemployment, especially following the COVID-19 pandemic.

Other residents highlighted that rises in the costs of energy and food had made it harder to pay back debts and manage finances. This was especially the case for households in receipt of benefits.

Half of those interviewed had illnesses and disabilities that limited their capacity to manage their debts. While just under half of residents struggled to manage household bills due to a lack of experience in budgeting.

Case study: One family’s journey into debt

Graphic to illustrate some of the complexities and life events that result in a family being in debt

How one couple with children found themselves in debt after Covid and lockdown

Having multiple complex issues made it difficult for residents to navigate and respond to financial crises.

One family with children found themselves in debt after Covid and lockdown, as the graphic above shows. The domino effect of ill health on being made redundant and subsequently lower income meant that this couple was unable to meet their essential costs and they began to miss bills and payments.

Poor mental health limited their ability to navigate support and respond to their financial crisis. When the council posted letters informing them of their council tax arrears, they didn’t initially engage. They also faced immigration issues, and Council Tax liability discrepancies delayed their ability to tap into available support. Their late benefit application meant that they lived on very little income for months.

Each journey into debt is unique and this single case is not generalisable to all debt cases from the residents interviewed. However, this couple’s journey highlights the variety of interrelated drivers that contribute to a household’s journey into debt.

Most residents did not perceive the council as a support agency

Twelve of the 20 residents interviewed had a negative view of their interactions with the council. Many residents found their interactions with the council to be stressful and threatening. Others perceived that there was a lack of interest in their personal situation.

Pie chart graphic showing results from interviews with residents and their perceptions of their interactions with a councilOne lone parent who had poor mental health struggled to keep up with her rent payment for her council tenancy. She shared her experience of interacting with the council.

My housing officer reached out, they weren’t that helpful, they’re the ones that are really aware of these things and could’ve pointed me in the right direction, but it was just more threatening. And because I suffer from anxiety and depression it was just like more threatening like ‘oh we could take your house away we could evict you’. It could’ve been more like ‘this is how I can help you’.

Those who viewed the council in a negative light did not report being signposted to any support. From their interactions with the council, they felt unaware of the steps they could take to make their situation better.

Residents who had a positive experience explained that they had received practical instructions about the route out of debt like a repayment plan. One single parent explained her positive experience.

The person I spoke to was very helpful. He’d done his best to get me the best deal, to get me the lowest thing that I can pay, and I can’t argue with that.

1. Service transformation: Make the first debt-related contact count

Each resident was asked for service transformation recommendations for the council to improve the support for other residents in debt.

Several residents mentioned that the first contact from the council should be friendly rather than threatening, with clear signposting to the available support. The council should use phone or text messaging rather than letters. There should be space for the resident to explain their situation without aggression or threats.

I think maybe just be more compassionate, more empathetic, that’s what I would say. A lot of people get embarrassed. I remember I used to get embarrassed by these things.

If they could be a bit empathetic and a bit more understanding of people’s situations, that would be amazing.

Residents also expressed that this first contact should be at the earliest possible instance of arrears or debt, like the first missed payment.

2. Service transformation: Develop customer-focused services

Many residents also preferred face-to-face contact with one named individual from the council where possible. This way the resident might be able to build a relationship with the council and feel as if their personal situations were more fully understood.

Providing holistic or specialised support for residents would also help in instances where many complex factors were impacting the household’s financial situation.

One single resident explained what they wished to see from their council.

It’s always easier to deal with one person, you can have a relationship with that person. That person knows you….one person can be a lot more understanding… the next person might not understand you as much as the first person. You’ve built that relationship and then you have try to open again to another person.

Alternatively, data sharing between other agencies during challenging life events like bereavement or job redundancy might be used to provide preventative support to households.

How local authority’s data can support residents in debt

Our Low Income Family Tracker platform (LIFT) enables councils to identify households at risk of falling into debt before missed payments. Using our financial resilience, local authorities can identify which households do not have enough income to meet their essential costs or rent.

Graphic of a screeshot from Policy in Practice's LIFT software platform showing results from data analysis on a household's finances to understand their journey into debt

Councils can understand a household’s journey into debt, and how to intervene, by analysing their administrative data using LIFT

3. Service transformation: Inform residents about available council help

Residents said that the council should provide clearer step-by-step instructions on how they can take action on their debts and arrears. Since many residents were unaware of their entitlement to support, they did not know how to respond to their financial situation. Signposting to benefit checkers like the Better Off Calculator would enable people to know what available support they could get.

There should be clear steps that the resident can take to navigate their debt, like where to receive debt support, how to apply for benefits or check entitlement, or how to set up repayment plans. This information should be accessible to anyone, using flyers or leaflets.

Residents also recommended that the council website be updated with a clear message that the council is there to help. The support provided should be uniform and co-ordinated across departments.

One resident describes their suggestions for how the council might share information about the route out of debt.

Giving a layout, an overview, maybe not so many papers, maybe videos, sometimes things land more in videos. And also highlighting what people are entitled to when they do face difficulties. I know they just say ‘Oh just go to the website,’ but some people can’t always access the website…so just making these things more accessible.

How to use data to support residents in debt within your local authority

Similar to this London Borough, some local authorities across the UK are working hard to provide proactive support to households in financial crises by using their administrative data.

Our LIFT platform was built to give councils a live view of their low-income households and shows those in council tax and rent arrears. These insights can be used to segment debtors and highlight which households might be contacted for additional help, such as debt management advice, income maximisation or discretionary support.

Data analysis can also be used to tailor contact activity to improve the level of resident engagement.

To hear more about our research on customers’ journeys into debt and how data can show what service transformations could best support residents in debt, join our free webinar on Wednesday 25 January from 10.30 to 11.45. See details and register here.

The research and analysis featured in this blog were conducted by Zoe Charlesworth, Associate Policy and Research Lead, and Tylor-Maria Johnson, Senior Policy and Data Analyst, for Policy in Practice.

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Policy review of 2023 and what 2024 may hold Join our last webinar of 2023 to hear our policy analysts review 2023's policy changes and big issues, from the ongoing cost of living and energy crises to the funding of local government and the Autumn Statement.

We will highlight our policy findings from the year including our work that revealed that millions of households across the UK are missing out on £19 billion of support each year.

We'll look at the role that data is playing in helping leading organisations to tackle these issues.

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Along the way we'll share the positive impact that organisations we work with ​are having, and give practical solutions that others can adopt.
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