UK HOUSEHOLDS are being driven further into debt by the rising cost of living, a new, decade-long study has shown. An estimated one million people on low incomes are now in arrears after paying for the basic essentials.
The findings are set out in the report Pushed Under, Pushed Out, published by Christians Against Poverty (CAP) on Tuesday. It is based on research carried out by the Centre for Research in Social Policy at Loughborough University, which analysed information on household finances from the Office for National Statistics — more than 35,000 individuals in more than 17,000 households. People were interviewed every two years from 2010 to 2020.
The study tracks levels of debt in this period, analysing how the use of credit to pay for essentials had tipped people below the Minimum Income Standard. This is the widely used benchmark of an acceptable living standard, updated each year.
The researchers found that debt repayments of just £30 a week were enough to tip people below the minimum income threshold, increasing the risk of more acute deprivation. Lone parents were particularly vulnerable to slipping below the threshold because of small debt repayments (defined as up to £70 a week). People living with disabilities, or in unemployment, were also vulnerable.
The report also analyses an online YouGov survey of 2089 adults, commissioned by CAP, and conducted from 12 to 15 January 2024, weighed against general population figures. It found that 82 per cent of people with income below the minimum level were in arrears owing to household bills — representative of about one million people in the UK, CAP says.
The poll also found that, in the past six months, nine per cent of respondents had chiefly used credit to pay for monthly bills — the equivalent, if scaled up, of 4.7 million people. And 42 per cent of respondents (the equivalent of 22.4 million people) had limited their use of electricity or gas once a month or more often, to offset the rising cost.
For the same reason, 17 per cent of UK adults polled had skipped meals at least once a month; nine per cent had done so on at least once a week.
In a foreword to the report, the Archbishop of Canterbury writes that falling behind on utility and other bills, and relying on credit to pay for them month to month, traps people into a “vicious cycle” of debt that is “causing havoc” in the UK.
“We all hear about families sitting in cold, dark homes unable to afford to top-up their energy meters. I hear, in the reports from clergy and church people in hard-pressed communities, how illegal money lenders and loan sharks threaten people, including single mothers and others with vulnerable dependents, who owe them money.”
The charity estimates that more than 15 million people in the UK are now struggling with debt. CAP reported that their debt advisors, who used to be able to help 90 per cent of people who turned to them for help to become debt-free, now struggled to do so for half their clients. Its advisers said that the situation was the worst that they had seen.
The chief executive of CAP, Stewart McCulloch, said: “Around half of our clients don’t have enough income to cover their needs, even after professional debt advice from us. They have reached a tipping point into poverty, and our research is showing millions more are facing this.
“As a professional debt-help charity, and as people committed to seeing a fairer society, we want to set our sights higher than simply accepting that millions can barely get by. We believe that individuals, families, and communities all benefit when people have a liveable income.”
Dr Juliet Stone, Research Fellow at Loughborough University’s Centre for Research in Social Policy, said: “Relatively little research has been done to look at the impact that debt and debt repayments can have on poverty and people’s living standards. Our analysis shows that, for households whose financial resources are already stretched, debts can result in income being pushed well below what is needed to live with dignity.”
The situation was “only likely to get worse”, she said. “Costs continue to increase, wage growth remains slow, and benefits are falling well short of providing a safety net, let alone enabling people to live with dignity.”
The election year was “pivotal” for the UK, she said. “We desperately need to rethink how we support those who are most vulnerable, so they can meet their core needs — the sorts of things many of us take for granted — and feel part of the society they live in.”
Among the recommendations for the Government set out in the report is the use of the research to inform anti-poverty policies and to increase the minimum living wage to meet the Minimum Income Standard.
CAP is also calling on the Government and local authorities to make debt-reduction rates from benefits more affordable. This is when payments are deducted at source for debts owed to the Government, such as council-tax arrears, but also for other debts, including energy or rent. Otherwise, people are unable to pay for essentials without relying on credit. Up to 25 per cent of of someone’s benefits can be deducted for debt.
The Chancellor’s Spring Budget, last week, announced the scrapping of the payment for Debt Relief Orders, which allow people to cancel debts if they cannot afford to pay them back. This was welcomed by CAP (News, 8 March). The charity warned, however, that it expected that half its clients who had obtained the orders would end up back in debt because of insufficient income to pay for essentials.
Francis Martin/Church TimesMembers of the CAP team gather outside the Palace of Westminster on Thursday of last week“Experts by experience” speak at launch. At an event in the Palace of Westminster on Thursday of last week, three former CAP clients, “experts by experience”, gave their response to the report, writes Francis Martin.
Melinda spoke about the difficulties that people faced in navigating the benefits system, and said that the Minimum Income Standard, used in the report, was a useful tool, as it shone a light on the fact that “if you haven’t got enough to buy food, you won’t have enough to put money away” to meet unexpected bills.
She said that it was sometimes too easy for people to get credit, and urged providers to show more discernment in how it was apportioned. CAP’s director of external affairs, Gareth McNab, said: “Wouldn’t it be good if it was as easy to get support as it is to get credit?”
The danger of ending up in a “reactive situation” was raised by Jim, another of the CAP “experts by experience”, who described how court and bailiff action could lead to a spiralling problem.
James, a third former CAP client, said that factors out of someone’s control, such as a miscalculated bill from a utility company, could plunge a family into debt. He spoke of his ex-partner, who had been billed at less than the real amount for energy, and then had had to take out a loan to pay a large backdated bill when the company noticed the mistake.
Other participants in the CAP round table included Richard Lane, the chief client officer for StepChange, another debt charity. Mr Lane said that almost 60 per cent of the charity’s clients declared an additional vulnerability, such as addiction or mental-health issues, which made it harder for them to find their way out of debt.
The director of programmes and partnerships at the grant provider Turn2Us, Sarah McLoughlin, said that the organisation was merely “plugging the gaps” left by the benefits system, and that change was needed.
The Labour MP Sir Stephen Timms, who hosted the meeting, agreed. “The reality at the moment is that the level of benefits is too low,” he said. The Work and Pensions Select Committee, which he chairs, would soon be publishing a report on the level of benefits.
There was also a need for public bodies to understand reform in the same way as private debt companies had, to ensure that they were not “taking large chunks of people’s money” in debt charges.