Citizens Advice yesterday published new research into negative budgets, showing the extent to which people are unable to meet their living costs due to low income and high household costs.
The analysis uses, for the first time, a dataset made up of detailed financial information on Citizens Advice debt clients to assess financial security and model potential solutions. The analysis shows that as well as becoming more common:
- The depth of people’s negative budgets has increased. In 2016/17 the average negative budget was £167. In 2018/19 it was £203. This means that on average, those struggling with a negative budget had £203 more going out than they had coming in as income that month.
- Large numbers of people that Citizens Advice helps are close to falling into a negative budget. Nearly 2 in 5 of all the people helped last year had less than £100 left over to repay their debts. Meaning nearly 4 in 5 have less than £100 a month after living costs.
- People that Citizens Advice helps with negative budgets are more likely to be women, disabled people, and people with a long-term health condition.
In order to support people to cover their living costs and build income security, Citizen Advice is calling for the value of frozen benefits to be uprated by CPI plus 2% for four years. Under this scenario, this new research shows the proportion of households that Citizens Advice helps with debt receiving income-related benefits with a negative budget would fall by almost a third (30%) by 2024. This would give people more flexibility in their budgets, putting them in a stronger position to pay off existing debts, pay into savings, and manage an unexpected expense.
Citizens Advice will also be doing further work to identify how to improve household finances, looking at how the advice sector can respond to the challenge of helping people with negative budgets.