Tory cost of living crisis made worse by a decade of welfare cuts

New study examines the heavy toll of rising living costs on low-income families.

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After a decade of social security cuts and underfunding, an extensive new study by the Joseph Rowntree Foundation utilising a survey of about 4,000 people on low incomes demonstrates the significant toll the cost of living crisis is having.

The support package from the chancellor, while applauded for addressing growing energy prices, hardly scratches the surface of the financial issues facing low-income families that were extensively discussed in this paper.

In many situations, people were forced to choose between feeding their loved ones and making their rent payments on time, as described in the study. 2.3 million homes had already gone without both.

Low-income individuals have resorted to borrowing, adding £12.5 billion in new debt in 2022 out of a total of £22 billion. They owe high-cost lenders, such as doorstep lenders and illegal loan sharks, a total of £3.5 billion, which jeopardises their future financial stability.

Families are already having a difficult time making their payments. Since October of last year, total personal debt arrears have more than quadrupled from £1.8 billion to £3.8 billion, and JRF anticipates that these arrears will continue to grow as interest rates rise.

Unsettlingly, the research discovered that the government is making life extremely difficult for people by exploiting the benefits system to collect some debts, sometimes at exorbitant rates. Families receiving assistance without these “debt deductions” suffer less than those who are obliged to have them.

JRF is urging politicians to take into account a straightforward solution to the mounting financial problems of these families: allow them to repay their debt more slowly rather than automatically taking away up to a fourth of what individuals are entitled to each month.

Katie Schmuecker, Principal Policy Advisor 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.”

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