Significant number of consumers at risk of being unable to pay bills  

14th October 2020

A significant number of people are at risk being pushed into a position where they can’t pay their essential bills and could face spiralling debts if the uplift to Universal Credit and Working Tax Credit is not extended beyond April 2020 according to analysis from Citizens Advice.

Analysis of the people Citizens Advice helps with debt who receive Universal Credit or Working Tax Credit shows that 75% wouldn’t be able to cover their essential household bills if the uplift is removed. This is an increase of 32% points on the current 43% of people who, even with the uplift in place, still have what’s known as a ‘negative budget’.

A negative budget is where a debt adviser assesses that a person cannot meet their living costs. To do that, they use a tool called the Standard Financial Statement (SFS).

The charity’s analysis shows that dropping the uplift would mean a further one in five (19%) of all its debt clients wouldn’t be able to pay their bills. Currently 40% of all the people Citizens Advice helps with debt problems can’t cover their essential household bills. Removing the uplift to Universal Credit and Working Tax Credit would increase this figure to 59%.

The findings are taken from the charity’s new report Life on Less than Zero which highlights the problems for people struggling with negative budgets and those who are only just getting by.

Among the report’s other findings are that self-employed people are increasingly struggling to make ends meet. Nearly three in five (58%) of the self-employed people Citizens Advice helps with debt are now unable to cover their essential household bills, up from 40% last year.

For many people struggling with debts the prospect of paying them off is a distant hope. People Citizens Advice helps with debt have an average of just £20 left at the end of the month to put towards paying back what they owe after living costs are accounted for.

Those with rent arrears and council tax debt have even less. People the charity helps with council tax debt would take more than six years to repay their arrears using all of their available income, whilst it would take seven years for people we help with rent arrears to pay these off.

The charity is calling on the government to make the uplift to Universal Credit and Working Tax Credits permanent.

In addition Citizens Advice is calling for a series of other measures to boost the incomes and reduce costs for people unable to cover their essential household bills. Including:

Increasing legacy benefits – the charity’s research shows that 13%of people it helped with debt who receive legacy benefits (such as Jobseeker’s Allowance and Employment Support Allowance) would be lifted out of a negative budget if the uplift was extended.

Emergency loans and grants for renters – support rentersbehind due to Covid-19 with emergency government grants and loans to help pay off arrears

Additional local authority funding  – provide councils with funding  to make up for lost council tax revenue and amend regulations to help councils collect debt flexibly.

Build on the existing support in place for low-income households with energy bills – put in measures to prevent people falling into debt with their energy providers, including extending the Warm Home Discount Scheme beyond 2021, ensuring that people who need this support most get it automatically.

Chris Whitehead, Debt Team Leader, Citizens Advice Newcastle said “For a lot of people with debt problems there is a route out, but for many others there is just the prospect of getting deeper into trouble.”

“One of the hardest parts of debt advice is to say to someone there isn’t a route out of it unless their income increases. We do all we can to lower bills, increase benefits and access grants, but if people don’t have enough for the basics they face a prospect of spiralling deeper and deeper into debt.”

“Now and going forward the benefits uplift will continue to be a vital lifeline for many.”

Dame Gillian Guy, Chief Executive of Citizens Advice, said “The government has taken important steps to support people’s finances, keeping people in their homes and keeping the lights on during this pandemic. But there are still significant numbers of people who can’t even cover the basics and face deeper hardship.”

“The government must commit to keeping the current uplift and extending it to other benefits. This will be vital to keeping many families afloat now and in the months ahead.”

“The problem of people not able to cover the basics is not a new one, but it needs renewed focus from government. As the economic impacts of the crisis continue to be felt, this may be the sad reality for many more people.”