Local and central government must show ‘concerted effort’ to tackle problem debt if the multi-billion pound cost to the UK is to fall.

Damage to family life, mental and physical health, productivity and employment prospects caused by high levels of household debt are thought to cost the UK £8.3bn, a report by StepChange Debt Charity claims. Agencies including councils, the NHS and the welfare state are thought to have been footing this bill.

Costs incurred by additional housing benefit payments, evictions, homelessness prevention and support and moving are thought to total £2.8bn.

The charity also pointed to a ‘well established link’ between debt and mental health problems, highlighting the £960m impact that stress and anxiety has on mental support services and the NHS.

The Cutting the cost report called for a comprehensive debt plan involving councils, government and the private and voluntary sectors, which could look at new ways to support household savings.

A ‘breathing space scheme’ would also be necessary to protect people who are confronting their debt problems from spiralling interest and creditor action, the charity added.

Mike O’Connor, chief executive of StepChange Debt Charity said: ‘Problem debt costs all of us: families, businesses and communities. Lifting the scourge of problem debt and helping prevent it occur in the first place makes sound economic sense.

‘We need to see a concerted effort, especially with interest rate rises around the corner, by public bodies, lenders and charities to help people who are in trouble now or are in danger of getting into difficulty.

‘Problem debt is a brake on people’s capacity to work, or to return to work, a brake on aspiration and a brake on potential. The impact affects us all and we cannot afford to walk on by. Some people will always get into debt, but we need to prevent problem debt as much as we can and have practical solutions to help people when they do.’