6.8 million people struggling to pay for essentials, despite falling inflation
New research into the impact of high costs on people contacting National Debtline and Business Debtline.
Posted July 16, 2024
- 11.4 million (21 percent) UK adults’ financial situation worsening.
- Two in five (43 percent) National Debtline clients have a broken budget.
- Half (51 percent) of Business Debtline clients’ incomes not enough to cover essential costs.
New research from the Money Advice Trust, the charity that runs National Debtline and Business Debtline, shows 6.8 million (13 percent) UK adults are struggling to pay for their essential costs, such as rent and council tax. Despite inflation falling to 2 percent, an estimated 11.4 million (21 percent) people say their financial situation is worsening.
The findings, based on an Opinium poll of 2,000 UK adults, reveals the lasting impact of the cost of living crisis for millions of UK households.
Insight from the charity’s debt advice services highlights the deep-rooted challenges facing people and small businesses in financial difficulty. More than two in five (43 percent) National Debtline clients, and more than a half (51 percent) of Business Debtline clients are dealing with broken budgets – with not enough income to cover their essential costs.
Amounts owed for essentials increasing
The charity says its findings point to an increased debt burden for the most essential costs, which if unpaid can have severe consequences. Amongst callers to National Debtline:
- The average amount owed in rent arrears has increased by 21 percent in the last year, now standing at £1,904.
- The average amount owed in energy arrears has also risen by £419 to £1,541 – with more than a third (35 percent) of clients now dealing with energy debt.
- The average amount owed in council tax debt is up 49 percent since 2019 to £1,762 this year.
Impact not felt equally
The charity’s insight reveals that some callers to its services are more likely to experience a negative budget due to circumstances, including housing situation and relationship status. National Debtline clients with a negative budget are more likely to be renting (76 percent), and of those the majority are a sole tenant (76 percent).
Living without a partner impacted likelihood of experiencing severe financial difficulty - three in five (62 percent) National Debtline clients with a negative budget are either single, a lone parent or widowed, compared to married clients or those living with a partner (23 percent). More than half, 53 percent, of National Debtline clients receiving Universal Credit have a negative budget.
Mounting debt burden for small businesses
The charity has seen a steep increase in the level of business debt amongst callers to its Business Debtline service. Since 2020, the level of business debt amongst Business Debtline clients has more than doubled, rising from £20,592 to £49,900, an increase it says is partially driven by the financial impact of Covid-19.
Insight from Business Debtline shows that:
- More than a quarter (26 percent) of Business Debtline clients have tax debts, and the average amount owed has increased significantly - up by 84 percent since 2020 to £12,724.
- The average amount owed in energy debt has almost doubled since 2020, surging from £913 to £1,738.
In light of the findings, the Money Advice Trust is calling for the new Government to prioritise support for people in financial difficulty, including ensuring people on the lowest incomes are able to meet their essential costs. The Labour Party committed to reviewing Universal Credit in their manifesto and the Money Advice Trust has joined the Joseph Rowntree Foundation and more than 90 other charities in calling for an Essentials Guarantee to link the rate of Universal Credit to the cost of essential goods including food and utilities.
Steve Vaid, chief executive at the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said:
“Inflation levels may have subsided, but intense financial pressure continues to put strain on many households and small business owners.
“One of the biggest challenges facing the people we help is that many simply don’t have enough coming in to cover their essential costs.
“Supporting people out of debt needs to be an urgent priority for the new Government. This needs to include helping people on the lowest incomes by ensuring anyone receiving Universal Credit has enough to cover their essentials.
“It’s never too early or too late to seek advice – and no one should have to face this alone. Free debt advice services like National can help – so I would urge anyone who is struggling to cope to get in touch.”
National Debtline provides free, independent, expert advice. Contact National Debtline for free on 0808 808 4000 or via www.nationaldebtline.org
Read the full Broken Budgets report.
