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New evidence of the ‘year of financial fear’ being endured by UK’s low-income families

2022 has seen low-income families going without essentials, building up arrears and taking on debt just to get by

Date published:
  • Low-income families have fallen behind on payments by an average of £1,600
  • About 7 million households – equivalent to every family in the north of England - have missed out on essentials like heating, toiletries or showers because they couldn’t afford it this year, or didn’t have enough money for food last month
  • 1.3m low-income households (11%) have used credit to cover essentials this year
  • Over two million households are in debt to high interest lenders like loan shark or doorstop lenders
  • Government urged to cap how much it takes from vital universal credit payments to repay certain types of debts

Comprehensive new research by the Joseph Rowntree Foundation using a survey of around 4,000 people on low household incomes (the bottom 40%, which equates to an income of under £25,000 for a couple with no children) reveals the heavy toll the cost of living is taking after a decade of social security cuts and underfunding.

The Chancellor’s support package, although welcome to tackle rising energy costs, doesn’t even touch the sides when it comes to the financial problems of low-income families highlighted in this extensive report.

The report describes the impossible position people found themselves in choosing between paying rent on time or feeding their loved ones, in many cases unable to do either. 2.3m households found it was not a choice of heating or eating - they had already gone without both.

People on low-incomes have turned to borrowing as they have taken on £12.5bn of new debt in 2022, out of a total £22bn. They owe a total of £3.5bn to high-cost lenders including doorstep lenders and illegal loan sharks which can threaten their financial future.

Families are already struggling to make their repayments. Arrears on all personal debt have more than doubled from £1.8bn to £3.8bn since October last year and, with interest rates rising, JRF expects these arrears will spiral.

Worryingly, the report has found that the government is causing severe hardship by using the benefit system to collect some debts, often at unaffordable rates. People forced to have these ‘debt deductions’ are suffering more severely than families on benefits without them. JRF is calling on ministers to consider a simple fix to the spiralling financial woes of these families; let them pay back their debt more slowly rather than automatically clawing back up to a quarter each month from what people are entitled to.

Katie Schmuecker, Principal Policy Adviser at the Joseph Rowntree Foundation said:

“Our research illustrates the frightening year of financial fear low-income families are living through. Families up and down the country have been faced with options that are simple but grim – fall behind on bills, go without essentials like enough food, or take on expensive debt at high interest. In some cases they had to do all three.

“No one should be put in this precarious position. The hardship families are facing now builds on the foundations of a decade of cuts and freezes to social security. The Chancellor’s cost of living support package will offer some temporary relief, but rather than lurching from emergency to emergency government must get ahead of this problem. A simple thing they can do immediately to make a difference is to stop deducting debt repayments from benefits at unaffordable rates.

“The way government collects debts is making an already bad situation far worse, by making an already low basic rate of social security even lower still. It leaves too little to cover the essentials at the best of times, let alone during the biggest cost of living crisis in a generation – a crisis which shows no signs of abating.

“In addition the government should increase basic Universal Credit entitlements to ensure it always, at a minimum, enables people to afford the essentials when they fall on hard times.”


Families are going without essentials because they can’t afford them

  • Six in ten of all low-income families (60%) - amounting to almost 7 million households - had gone without one of the essentials since the start of 2022, or, had cut down on or skipped meals, or gone hungry in the previous 30 days. This is equivalent to every family in the north of England
  • One in five (21%) low-income households, the equivalent of 2.3m families, were going without enough food and were unable to keep their homes warm
  • A third (33%) of those who said they were going without essentials, said they had experienced having to go without four or more (2.3 million households)
  • One tenth (10%) report going without six or more types of essentials

Arrears are going up

  • 4.6m low-income households (40%) are behind on at least one bill – up by 20% since October
  • The average (mean) amount of arrears across all bills held by all low-income households is £1,600
  • Total arrears are up by £2bn from October, to £7.3bn
  • The £2bn increase is mostly seen in arrears from personal borrowing, which has more than doubled in 7 months, and is now at £3.8bn
  • Some 2 million low-income families (17%) are in arrears with energy bills, an increase of more than a quarter compared to October 2021

Benefit deductions are making a bad situation worse

  • According to information from the Department for Work and Pensions, almost half of households receiving Universal Credit (45%) have had money deducted from their allowance by the government. On average, people were losing £61 a month in deductions, it could be as much as £130.
  • 94% of UC recipients with a deduction were going without essentials, compared to a still shockingly high 76% of UC recipients without a deduction.
  • On average, households facing deductions owed over £300 more in arrears than most low-income households
  • More than seven in ten (72%) UC recipients with deductions went hungry in the last 30 days, compared to a still too high four in ten (42%) without deductions