Posted February 7, 2022
Mubin Haq, Chief Executive of abrdn Financial Fairness Trust, discusses the findings of their latest financial impact tracker in this guest blog for Thoughts at the Trust.
When the pandemic struck, together with the University of Bristol’s Personal Finance Research Centre, we at the abrdn Financial Fairness Trust launched a coronavirus financial impact tracker. This regular poll of around 6,000 UK households monitors people’s finances and is modelled on one which already exists in Norway. It has become an essential tool to help us identify particular groups who are struggling financially and to better understand who’s missing out from available support.
To date we’ve completed five rounds of the survey, and there have been some consistent findings. Overall nearly four-in-ten households across the UK are financially secure, one third are potentially exposed financially (due to factors such as low savings or high borrowing), nearly two-in-ten are struggling to make ends meet and one-in-ten are in serious financial difficulty. Surprisingly these proportions have remained largely unchanged since April 2020 when we first started collecting data.
Whilst it’s good news those headline numbers haven’t got worse, that’s still seven million families struggling to make ends meet or in serious financial difficulty. Day-to-day that means significant money problems for many. For example more than 8-in-10 of those in serious financial difficulty struggle to pay for food and/or bills.
However, it’s been a mixed picture. One-in-five UK households have seen their situation improve, many benefitting, at least financially, from the restrictions due to fewer opportunities for spending. For example, fewer opportunities to go on holiday or to eat out. On the flipside, for every household which saw an improvement in their finances, two saw their situation get worse, widening the gap between rich and poor. This isn’t quite what we had in mind when we and many others were supporting the call to build back better. Our analysis shows that having a low family income going into the pandemic and experiencing a major income shock such as a job loss were key drivers of negative changes in a household’s financial situation.
Many of the groups who have fared poorly during the pandemic will be familiar to us and are consistently identified in our tracker as well as in an extensive review of reports published during this period: disabled people, those reliant on social security, families with children and single parents, people in insecure work and the self-employed, ethnic minorities, and those in rented accommodation. Government support made a big difference but millions of people received inadequate support and were excluded.
We now face a real squeeze on living standards as inflation soars. The raising of the energy price cap by around £700 a year is a staggering increase, which many are unprepared for. A further rise is expected in October and will make things even more difficult, especially for those on lower incomes.
So, what can be done?
We think action is needed on a variety of fronts including:
- Wage growth, especially for those on lower incomes. We need to better reward and value jobs which are too poorly paid, such as those in social care;
- Help with the rise in energy bills which go beyond the recent measures announced by the Chancellor. The proposed support fails to sufficiently target those most in need;
- A more generous social security system, which currently fails to provide the basics many of us take for granted. At the very least we need to see benefits keep pace with inflation, as currently they’re only set to increase by 3.1% in April, way below the expected inflation rate of 6%.
These measures will come at a cost and we will all have to contribute. But as our research shows, some of us have deep pockets which have become even deeper during the pandemic. Financial security and financial fairness must be at the heart of how we make decisions going forwards.
The Trackers are available here, and the next one will be out later this year.
On the subject of changes, the name of our organisation has changed from Standard Life Foundation to abrdn Financial Fairness Trust. We will continue to shine a spotlight on issues relating to improving living standards and financial fairness in the UK.
Mubin joined abrdn Financial Fairness Trust in May 2018. He has worked for a number of independent funders including the South East London Community Foundation and Trust for London, where, as Director of Policy & Grants, he developed a range of initiatives tackling poverty and inequality as well as their research and policy work. He has been Chair of London Funders and on the boards of Community Foundation Network, the London Strategic Migration Partnership and the Homelessness Transition Fund. View all posts from Mubin Haq.