chapter 3 rd party report - united utilities · 2018-09-01 · report. chapter 3: 3. rd. party...

Debt chairty client insights reportChapter 3: 3rd Party Report

Document Reference: T2001

This report sets out key insights from StepChange on Debt Charity based on clients with water debt. It additionally presents a profile of North West clients with water debt, and compares this profile to all StepChange Debt Charity clients.

United Utilities Water Limited

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August 2017

StepChange Debt Charity client insights prepared for United Utilities

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Introduction

This report sets out some key insights on StepChange Debt Charity clients based in England

and Wales with water debt.

The statistics in the report are taken from a sample of 154,264 StepChange Debt Charity

clients in England and Wales who were advised over the phone between April 2016 and

March 2017.

31,544 StepChange Debt Charity clients in this sample were in water arrears.

The report compares these two client groups, alongside detailing comparisons and insight

into clients who in the North West of England specifically.

This report provides information and insight on client data, and looks in further detail at:

Reasons for debt

Referrals

Financials

Demographics

Types of debt

Benefits

Advice and solutions

Summary

This report presents a profile of our clients with water debt, and compares this profile to all

StepChange Debt Charity clients.

It finds clients with water arrears are more likely to be renters, not employed, and in arrears

for other priority expenditures.

Water arrears clients are also more likely to have used high cost forms of credit such as pay

day loans, catalogues and home credit. They are more likely to be lone parents and to be in

receipt of child benefit and child tax credit. They are more likely to be in receipt of incapacity

and disability benefits.

So while their total average outstanding debt balance is over £4,000 less than for all clients

in England and Wales, clients with water arrears may remain financially vulnerable for longer

than the average client.

Although we can start to build up a picture for clients in water arrears, our data also shows

that there is a limited amount of regional difference in demographics or finances between

clients in England and Wales and clients in the North West. Clients in the North West

generally reflect clients in England and Wales.

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Reasons for debt

The table below highlights the reasons people found themselves struggling with problem

debt.

The proportion of clients in water arrears fairly evenly matches the proportions of all clients in

England and Wales for each reason.

There are some small differences, for example a higher proportion of clients in water arrears

falling into debt problems due to injury or illness. Furthermore, clients in water arrears are

more likely to have contacted the charity due to a reduced income.

Reason for debt (%)

North West England & Wales

All Clients Water

Arrears Clients

All Clients

Water Arrears Clients

Bereavement 2.6% 2.7% 2.3% 2.4%

Increased priority expenditure 5.5% 4.7% 5.6% 4.9%

Injury / Illness 14.4% 16.7% 14.4% 16.8%

Lack of budgeting 19.3% 19.4% 18.3% 17.6%

Reduced income 16.0% 18.0% 16.5% 18.7%

Separation / Divorce 9.6% 9.0% 9.3% 9.1%

Unemployment / Change in employment status

19.2% 18.1% 20.1% 18.7%

Other 13.4% 11.4% 13.5% 11.9%

As mentioned previously, our data also shows that all clients in the North West are falling

into debt due to the same reasons as all clients in England and Wales.

Referrals

Clients find out about the help and support StepChange offers from a variety of sources such

as other charities, creditors, utility companies and word of mouth.

However, perhaps unsurprisingly, clients with water arrears debts were more likely than all

clients to be referred from utility companies; 15.2% of water arrears clients compared with

5.4% which is the average for all clients. This can perhaps be linked to data presented later

in this report on types of debts and arrears; water arrears clients are proportional more likely

to be behind on all types of priority expenditure, and less likely to have other types of debt.

This may imply why clients with water arrears debts are less likely to have been referred

from creditors compared with the overall average for all clients (29.4% for clients with water

arrears compared with 39.2% for all clients).

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Top five types of referral for clients with water arrears (%)

North West All Clients

All Clients Water

Arrears Clients

All Clients Water

Arrears Clients

Utilities 4.0% 8.2% 5.4% 15.2%

Other creditors 39.1% 30.4% 39.2% 29.4%

Personal recommendation 10.9% 11.7% 10.1% 10.0%

Internet 8.2% 8.7% 7.8% 7.2%

Debt collector 4.0% 5.8% 3.9% 4.7%

The proportion of clients in water arrears being referred to StepChange Debt Charity from

utility companies in the North West was 7% lower compared against all clients in England

and Wales in water arrears.

There are however minimal differences between these groups across other types of

referrals.

Water bills

There is little difference between all clients and clients with water arrears debts in terms of

average monthly water bills. ‘All clients’ record an average of £36.46, whereas clients who

have water arrears debts record an average of £37.94.

There are also a lower proportion of clients with water payments in water arrears in the North

West (26.5%) compared against all those for England and Wales (29.7%).

Financial circumstances

There is little difference between the incomes of clients with water arrears and clients without

water arrears.

Clients in water arrears receive on average £11 per month less compared with the overall

client population. However StepChange clients’ household income levels are, on average,

below the UK household median.

Furthermore, there are limited differences in breakdown by income group. 45% of clients in

water arrears are in the £10,000 to £19,999 income group level compared against 43.3% of

all clients in England and Wales.

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Client income groups (%)

North West England and

Wales

All Clients


All Clients


<£10,000 31.6% 29.8% 32.5% 30.5%

£10,000-£19,999 46.2% 48.0% 43.3% 45.0%

£20,000-£29,999 17.1% 17.8% 17.9% 19.0%

£30,000-£39,999 4.0% 3.6% 4.7% 4.4%

£40,000 & over 1.1% 0.8% 1.5% 1.0%

However, clients in water arrears have a much lower average budget surplus* of -£120.41

compared against all clients, who have an average budget surplus* of -£25.66.

This is driven by higher average living costs reported by clients with water arrears. Here, it is

notable that clients with water arrears are more likely to receive benefits in respect of

children and illness or disability.

With that said, the average outstanding debt balance is £4,312 lower for clients in water

arrears compared against the average for all clients, as presented in the chart below.

Please note, the total outstanding debt balance here differs from the total amount we

reference in our Statistical Yearbook publications. This is due to the difference in the time

period of total clients included in this analysis and that this data only encompasses those

who were advised over the phone, and excludes anyone advised via our online advice tool,

Debt Remedy.

Average client financials: Income, expenditure, surplus and debt balance


All Clients


All Clients


Avg client income (excluding clients with £0 income)

£1,252 £1,251 £1,284 £1,273

Avg expenditure (excluding clients with £0 expenditure)

-£1,220 -£1,318 -£1,266 -£1,368

Avg client budget surplus* -£5.68 -£91.92 -£25.66 -£120.41

Avg client total outstanding debt balance £12,133 £7,066 £11,841 £7,529

*Surplus is the amount of balance left at the end of each month after clients have completed StepChange Debt

Charity’s debt advice and budgeting process.

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Demographics

Housing

A particularly notable finding is that StepChange Debt Charity clients are far more likely to be

renters than homeowners. This is an increasing trend in our data, and a statistic which has

significantly grown over the past few years.

Those with water arrears are even more likely to live in rented accommodation, with around

80% of all clients renting compared with 85% of those in water arrears. Over a third of clients

with water arrears live in the private rented sector.

Client housing situation (%)


All

Clients

Water

Arrears

Clients

All

Clients

Water

Arrears

Clients

Own Outright 3.2% 2.4% 2.9% 2.0%

Mortgage 21.5% 14.4% 18.1% 12.9%

Rent & Mortgage 1.4% 0.7% 1.5% 0.9%

Rent- Housing association 15.3% 26.6% 14.9% 26.0%

Rent -Local authority 12.5% 19.7% 16.8% 22.8%

Rent - Private landlord 32.5% 36.2% 32.6% 35.5%

Board Payment 13.7% 0.0% 13.1% 0.0%

More clients in the North West are homeowners compared to those in England and Wales,

both for all clients and those in water arrears. 21% of all clients own their own home

compared to 24.7% of all clients in the North West.

Family type

Overall, StepChange Debt Charity clients are most likely to be single without any children,

with 42.2% fitting this family demographic. However, a lower proportion of StepChange

clients with water arrears are single without children – broadly in line with the proportion in

the general population.

StepChange Debt Charity clients are far more likely to be single with children than the UK

population and this is even more pronounced among clients with water arrears.

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The proportion of clients in a couple with children broadly matches the UK average, but the

proportion of StepChange clients in couple households without children is much lower than

for the UK population.

There are some differences between clients in water arrears and the total client population

when it comes to family type.

Water arrears clients are far more likely than all clients to be single parents, even when the

overall proportion of StepChange clients is already far higher than the UK average.

Clients in water arrears are also less likely to be in a couple without children, or single

without children when compared against the average statistics for all clients.

Client family type (%)


All Clients Water

Arrears Clients

All Clients Water

Arrears Clients

ONS UK average

(2016 results)

Couple with no children 14.7% 10.6% 14.8% 9.8% 37%

Couple with children 21.7% 21.8% 22.5% 23.8% 22%

Single with no children 44.1% 37.6% 42.2% 34.5% 34%

Single with children 19.5% 30.0% 20.5% 31.9% 7%

In terms of regional differences, clients in the North West (44.1%) are more likely to be single

than all clients in England and Wales (42.2%).

Gender

The overall population of StepChange Debt Charity clients are disproportionately female

(57% female vs 43% male), which is a trend we have seen continue to grow over the past

few years.

This is even more so for clients with water arrears debts. 66.4% of clients in water arrears

are female, compared to just 33.6% who are male.

Whilst this gender imbalance is fairly reflective of the overall client population, this could

potentially be driven by the disproportionate amount of single parents in water arrears.

Employment

Clients in water arrears are also less likely to be in full-time employment compared with all

clients.

Furthermore, clients in water arrears are more likely to be unemployed (39% in water arrears

compared to 30% of all clients).

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Client employment type (%)


All

Clients

Water

Arrears

Clients

All

Clients

Water

Arrears

Clients

Employed Full Time 33.2% 24.3% 30.9% 21.5%

Self Employed 8.3% 7.4% 9.0% 8.0%

Employed Part Time 18.9% 20.5% 19.2% 21.7%

Retired 5.5% 2.6% 5.4% 2.9%

Unemployed 28.8% 38.6% 30.0% 39.0%

Types of debt

In terms of types of debt, clients in water arrears are notably less likely to have credit card

debts, overdraft debt, personal loan debts or storecard debts. However water arrears clients

are more likely to have debts in high cost forms of credit, such as catalogues, home credit

and payday loans.

Debt type per average client (% and £)

North West England and Wales

All Clients

Water Arrears clients

All Clients


Catalogue % Clients with a catalogue debt 38.6% 40.6% 36.1% 38.6%

Avg catalogue balance per client £1,577 £1,309 £1,589 £1,352

Credit card % Clients with a credit card debt 60.8% 48.9% 63.0% 50.5%

Avg credit card balance per client £6,798 £3,356 £7,087 £3,843

Overdraft % Clients with an overdraft debt 53.1% 46.3% 52.0% 45.5%

Avg overdraft balance per client £1,425 £1,201 £1,534 £1,258

Personal loan % clients with a personal loan debt 46.8% 42.9% 45.2% 39.3%

Avg personal loan balance per client £6,669 £4,342 £7,149 £4,597

Storecard % Clients with a storecard debt 11.0% 8.3% 11.5% 9.8%

Avg storecard balance per client £963 £674 £967 £766

Home credit % Clients with a home credit debt 9.9% 18.3% 10.0% 17.8%

Avg home credit balance per client £1,150 £1,006 £1,327 £1,190

Pay day loan % Clients with a pay day loan debt 12.2% 14.5% 10.6% 12.0%

Avg pay day loan balance per client £1,038 £860 £1,051 £863

Other debt % Clients with a Other Debt 44.4% 57.6% 43.6% 54.9%

Avg other balance per client £5,850 £2,859 £4,225 £3,074

Family / Friend Loan

% Clients with a family/friend Loan 16.8% 19.1% 16.0% 17.4%

Avg family/friend loan balance per client £2,674 £1,988 £3,028 £2,223

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Clients in the North West are slightly more likely to owe money to family or a friend than all

clients in England and Wales.

Arrears

Other arrears

While clients with water arrears tend to have lower levels of credit debt (driven by lower

balances on credit cards and personal loans), this group are far more likely than all clients to

also be in arrears on other household bills.

The is best exemplified by the fact that the proportion of water arrears clients who are in

Council Tax arrears is over twice the amount of all clients who have council tax arrears but

not water arrears; 58.2% of water arrears clients are also in Council Tax arrears compared

with just 25.8% of all clients.

32.3% of water arrears clients are also in electricity arrears, compared with just 13.6% of all

clients.

Clients with arrears on household bills (%)


All Clients


All Clients


Council Tax arrears 26.7% 61.0% 25.8% 58.2%

Electricity arrears 13.8% 31.9% 13.6% 32.3%

Gas arrears 6.6% 17.3% 6.9% 18.0%

Mortgage arrears 6.1% 8.3% 5.3% 7.8%

Rent arrears 15.0% 35.1% 16.7% 35.5%

TV Licence arrears 6.3% 20.1% 6.1% 17.8%

HP arrears 2.6% 4.7% 2.4% 3.8%

Our analysis does however suggest that clients in water arrears (before speaking with

StepChange Debt Charity) may have considered water debt as a lower priority compared

against other household bills.

Clients in water arrears are on average 26.4 months behind on their water bills.

This is compared to 9.4 months for energy, 7.4 for a mortgage and 19.4 for Council Tax.

This could reflect clients’ appreciation of the different sanctions available to creditors of

these household bills as part of their strategy for coping with financial difficulties.

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Regional differences in arrears

Clients in the North West have a lower average of arrears compared to all clients in England

and Wales, however the difference is minimal.


All Clients


All Clients


Avg Total Arrears Balance £2,079 £2,375 £2,183 £2,482

Benefits

Clients who have water arrears debts are far more likely to receive benefits compared to the

overall client population in this data set.

Over half (55.6%) of all StepChange Debt Charity clients have benefit income compared

against almost three quarters (74.3%) of water arrears clients.

The table below shows the breakdown in percentages of clients receiving each type of

benefit income.

Water arrears clients in England and Wales are far more likely to receive child benefit

income and child tax credit income than all clients. This difference is even greater when we

compare water arrears clients against all clients in the North West region.

Clients with water arrears appear more likely to be in receipt of benefits for illness and

disability.

This reinforces the suggestion that clients with extra costs or persistent lower incomes may

be more likely to experience water arrears,

Note that the proportion of clients receiving benefit in respect of unemployment (JSA) is

much lower than the proportion of clients who reported being unemployed.

The data also shows the proportion of clients in water arrears is higher for all types of benefit

income.

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Clients with each type of benefit income (%)


All Clients


All Clients


% Clients with Child Benefit income 33.4% 46.3% 34.9% 49.9%

% Clients with Child Tax Credit income 21.9% 33.5% 24.7% 39.9%

% Clients with DLA income 8.8% 10.8% 8.0% 9.5%

% Clients with Incapacity income 12.8% 18.2% 12.2% 17.7%

% Clients with Income Support income 8.0% 13.9% 7.6% 12.2%

% Clients with JSA income 4.1% 5.5% 5.6% 7.5%

% Clients with Working Tax Credit income 7.1% 9.9% 6.8% 10.1%

% Clients with any benefit income type 55.3% 73.0% 55.6% 74.3%

There is also a difference in the average amount of benefits received when comparing all

clients against just those with water arrears debts.

On average, all clients who receive some of benefit receive an average of £602 per month,

whilst those in water arrears have £691 per month.

In terms of regional differences, similar proportions of clients in the North West (55.3%) were

receiving at least one type of benefit compared to all clients in England and Wales (55.6%).

Advice and solutions

Solutions offered at debt advice

Of all solutions offered (a list of solutions is shown in the table below) at the end of a debt

advice session, water arrears clients were most likely to be offered a Token Payment Plan.

A Token Payment Plan is where a client pays £1 a month to each of their creditors until their

situation improves enough to increase their payments.

The fact that most water arrears clients were recommended this option suggests that many

in this group have experienced a temporary yet severe income shock. The higher proportion

of water arrears clients having high cost credit debts would also indicate this.

This suggests that water arrears clients are likely to have a limited amount of money at the

time of advice; however a positive change in their circumstances would be expected in the

near future.

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It is also more likely for water arrears clients’ living costs to be greater than their income at

the end of their debt advice session, with almost a quarter meeting this classification.

This can perhaps be linked to the high proportion of water arrears clients who are also falling

behind on other household bills.

The table below shows the differences between all clients and those with water arrears with

a focus on those in the North West and those in England and Wales. The percentages are

the proportion of clients offered each solution type as the most appropriate recommendation

at the end of their debt advice phone session.

For example, when taking all clients into account, the most common solution offered is a

Debt Management Plan (DMP), with over one quarter (26.6%) being recommended this

solution as the best option for their current situation.

Clients offered each solution as the top recommendation (%)

North West England and Wales

All Clients


All Clients Water

Arrears Clients

Debt Management Plan / Xplan 28.6% 16.2% 26.6% 16.1%

Token Payment Plan 23.4% 26.4% 17.7% 24.3%

IVA 5.1% 2.8% 4.7% 2.4%

Debt Relief Order 6.2% 7.2% 6.3% 6.6%

Equity Release 0.6% 0.3% 0.6% 0.2%

Living costs greater than income 17.6% 23.0% 19.6% 24.8%

Bankruptcy 5.8% 5.8% 5.9% 5.8%

Client can handle 3.2% 0.6% 2.8% 0.7%

Realise assets 2.3% 1.0% 2.4% 1.2%

Other 6.3% 8.4% 6.7% 9.8%

Clients considering solutions 6.8% 8.5% 6.6% 8.0%

Clients in the North West were more likely to be offered a Debt Management Plan than all

clients, with 28.6% recommended as their most appropriate solution.

However, the same proportion of clients in water arrears in the North West and England and

Wales received a Debt Management Plan as their top recommended solution.

END

chapter 3 rd party report - united utilities · 2018-09-01 · report. chapter 3: 3. rd. party...

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