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Households under pressure – tracking the impact of cost of living pressures

Jane Tully discusses findings from the Money Advice Trust's new Under Pressure report

Jane Tully

Acting Deputy Chief Executive Money Advice Trust

Posted June 20, 2023

The ongoing high cost of living, and how to tackle it, has continued to be a key focus of policy makers, regulators, charities, and other organisations across the UK.

Since March 2022, we have been tracking its impacts on households and small businesses. The results have given us insight into how people across the UK are coping, instances where they are not, and the challenges many people are now facing as their incomes struggle to keep up with the costs of their essentials.

Our Collision Course and Impossible Choices reports tracked the growing pressures during March and then August last year. Almost a year on from Impossible Choices our latest report, Under Pressure, based on a sample of 2,000 adults across the UK provides updated insight on the impact that high costs are having on households and how they are viewing the coming months.

Feeling the strain

Compared to when we first carried out this research in March 2022, the period of sustained high costs is translating to a higher debt burden for millions of households.

The proportion of households falling behind on one or more household bill has grown from 1 in 6 (15%) to more than 1 in 5 (22%). An estimated 11.6 million UK adults have fallen behind on one or more household bill.

It is perhaps not surprising that a quarter of UK adults (equivalent to 13.2 million people) are worrying about money every single day.

The increasing cost of utilities has had an impact on most household budgets to some degree, but our latest findings reveal a worrying rise in the number of people facing difficult choices when it comes to their essential household bills. Since March 2022, the proportion of UK adults going without electricity, heating or water in the past three months has risen from 12% to 18% – with an estimated 9.5 million people now forgoing these essential utilities due to rising costs.

Taking a closer look at energy bills, the number of UK adults behind on energy payments has risen to 5.5 million, nearly 2.1 million more since March 2022.

And while many have received a positive response from their supplier after contacting them for help, an estimated 3.9 million people were not offered any support from their supplier despite contacting them for assistance as their bills became unaffordable.

Certain groups more heavily impacted

The high cost of living has impacted everyone in some way, but our findings show the effects are more severe for certain groups.

The proportion of people from a black African or Caribbean background who reported using foodbanks in the past three months is almost double that of the general population (10% compared to 6%). 40% of people from an Asian background had to use credit to pay for essentials – almost one and a half times higher than the general population (28%).

People in receipt of Universal Credit have also been much more likely to experience financial difficulty. In the past three months, one fifth (21%) had gone without food; one in eight (12%) had started using foodbanks and a similar proportion (14%) had increased their use of foodbanks

The situation is worryingly similar for people unable to work due to long term illness or disability, many of whom will be in receipt of means-tested benefits. Almost one third (31%) said they had gone without heating, electricity or water in the past three months– 1.7 times higher than the general population.

Debt collection activity adding to the pressure

Our findings are a clear indicator that, for millions of people, household budgets simply cannot keep pace with rising costs.

As a result, many are now facing debt collection activity which is adding to the mounting pressure on their finances.

Over a quarter (26%) of people behind on their council tax bills said their council had asked them to repay arrears at a rate they couldn’t afford. This is particularly concerning given that council tax collection can rapidly spiral.

Our findings also highlight the compounding impact that deductions from benefits have had for many low-income households. Since March 2022, we estimate that around 2.2 million people have had money deducted from their benefits to repay debts. Of these, more than a third (35%) said this led to them going without essentials. A quarter (27%) said it caused them to fall behind on other bills, indicative of a situation that, far from resolving outstanding debts, simply transfers them to other areas.

Support and reform needed

For many people, cost of living pressures will be felt well beyond any fall in inflation levels or interest rates. Our findings over the past 18 months have identified a clear need for more support to aid the recovery of the hardest hit households, and has shone a light on a system of Government debt collection practices and access to debt options in need of improvement and reform.

We know that a major driver of financial difficulty is people not having enough income to cover their essential needs, and our findings point to a benefits system that contributes to this problem for millions of people.

People in receipt of benefits should not be faced with impossible choices when trying to make ends meet. That is why we have joined the Joseph Rowntree Foundation, The Trussell Trust and more than 50 other organisations and charities in calling for the Government to adopt the Essentials Guarantee, linking benefit payments to the cost of essentials.

Beyond this, tracking the impact of rising living costs on households across the UK more broadly has highlighted the need for:

  • A dedicated government ‘Help to Repay’ scheme to provide payment matching and the option to write-off energy debts for people struggling to afford these – Created and funded by The Department for Energy Security and Net Zero this would ensure people who fall behind are not saddled with unaffordable repayments and impossible choices on whether to heat or eat.
  • The Government to take immediate steps to improve the way it collects debts owed to central and local government – to prevent people being pushed into further difficulty.
  • The immediate introduction of measures to improve access to Debt Relief Orders by the Department of Business and Trade and the Insolvency Service – to improve safe routes out of debt for people who have fallen behind during this period.

You can find out more in our latest report.

Jane Tully

Acting Deputy Chief Executive Money Advice Trust

Jane Tully is the Trust’s Acting Deputy Chief Executive and has served on the charity’s Senior Leadership Team since 2014. She leads our work on policy, communications, marketing and research. She previously worked for the Charity Finance Group, Charity Commission, NSPCC and local government. View all posts from Jane Tully.

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