Millions of low-income households pulled under by arrears as living costs rise

21st October 2021

New research by the Joseph Rowntree Foundation (JRF) has found that a third of low-income households are unable to pay their bills,

The research found that 3.8 million low-income households are behind on rent, bills or debt payments,  which is up threefold since the pandemic hit, revealing the growing cost of the living crisis facing the UK’s poorest families with 950,000 are in rent arrears, 1.4 million are behind on council tax bills, and 1.4 million are behind on electricity and gas bills.

The JRF says that new research highlights that low-income households, who have borne the financial brunt of the pandemic so far, and are now also being dragged down by debt with millions of low-income households pulled under by arrears while living costs rise.

A third of all low-income families are in arrears, up from 11% prior to the pandemic, it estimated. This rises to 44% of working-age households and 71% of younger households aged between 18 and 24. Families with children and black, Asian and minority ethnic households were particularly hard hit.

With 3.8 million low-income households across the UK in arrears, a further 4.4 million have had to take on new or increased borrowing through the pandemic. Many of these households weren’t in arrears before the pandemic, and have faced income loss and increases in their expenses.

The JRF is calling on the Government to release these households from the burden of arrears by reinstating the Universal Credit lifeline, providing grant funding for targeted debt relief, and addressing key drivers of debt through system reform.

JRF says reinstating the Universal Credit £20 lifeline will help prevent low-income households from accruing more unmanageable debt. JRF says the Government should at least double the Household Support Fund to equip local councils and debt support organisations to provide targeted relief to low-income households facing unmanageable and unaffordable debts accrued during the pandemic and should also look to addressing the drivers of debt through systemic reforms, through preventing low-income households from accruing debt as soon as they claim Universal Credit and writing off historic tax credit debt.

Katie Schmuecker, the JRF Deputy Director for Policy and Partnerships said “Behind these figures are parents gripped by anxiety, wondering how they will put food on their children’s plates and pay the gas bill; young people forced to rely on friends to help cover their rent and avoid eviction.”

The JRF said there were signs the financial impact of the pandemic had ‘dragged families who were previously just about managing into arrears on essential bills’. Nearly 90% of households now behind on their household bills said that they were always or often able to pay all their bills in full and on time before the pandemic.

Families are facing a range of financial pressures over the coming months including rising energy and food bills and a rise in national insurance contributions next April to pay for the government’s social care reforms.