According to a report, low-income families are going through a “year of financial fear” and are making dire choices such as falling behind on their bills, going without essentials or going into expensive debt.
The Joseph Rowntree Foundation (JRF) said the cost of living crisis and a decade of social security cuts and underfunding are taking a heavy toll.
He used a survey of around 4,000 people with low household incomes in May and June (the lowest 40%, equating to an income of less than £25,000 for a childless couple), for the report .
Rather than compromise between heating and eating, one in five low-income households (21%) were unable to do either – depriving themselves of enough food and not being able to keep their house warm, the researchers found.
Six in 10 (60%) had deprived themselves of essentials since the start of 2022, or had reduced or skipped meals, or been hungry in the previous 30 days.
Two-fifths (40%) were late on at least one invoice. The average amount in arrears on all bills held by all low-income households is £1,600.
This affects all types of bills, including rent and loan repayment delays, and is largely due to high amounts of arrears on personal loans and credit cards, according to the report.
One of the reasons these amounts are so high is that many people have multiple arrears, which increases the amount they owe, especially if interest is accumulating on the debt owed, according to the report.
Some 17% of low-income households reported having arrears on energy bills.
So far this year, one in nine low-income households (11%) have used the credit to cover essential expenses such as rent or council tax, in response to the rising cost of living. Another 8% said they plan to do so in the coming months.
The report says this “paints an extremely worrying picture” where households cannot afford to cover basic bills and must take on interest-bearing debt to stay afloat.
Nearly a fifth (19%) of low-income households owe money to high-cost moneylenders, including home and payday moneylenders and pawnshops, as well as illegal loan sharks, according to the research.
The Foundation said that while a package of support measures previously announced by Chancellor Rishi Sunak to tackle rising energy costs is welcome, cost-of-living payments will “barely hit the sides, and still less will help to prepare for the coming winter”.
The foundation also argued that serious difficulties are caused by the way the benefit system is used to collect certain debts, often at unaffordable rates.
The JRF said it was calling on ministers to consider letting people pay off debt more slowly.
Katie Schmuecker, Senior Policy Adviser at JRF, said: “Our research illustrates the scary year of financial fear that low-income families are experiencing.
“Families across the country have been faced with simple but grim options – falling behind on bills, depriving themselves of essentials like enough food or taking on costly debt at high interest. In some cases, they had to do all three.
“No one should be placed in this precarious position. The hardships families are currently facing build on the foundation of a decade of Social Security cuts and freezes.
“The Chancellor’s cost of living support program will provide temporary relief, but rather than jumping from one emergency to another, the government must anticipate this problem.
“One simple thing they can do immediately to make a difference is to stop deducting debt payments from benefits at unaffordable rates.
“The way the government collects debts makes an already bad situation even worse, by driving down an already low basic social security rate even further.
“That 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 that shows no signs of abating.”
JRF is also asking for an increase in basic Universal Credit (UC) entitlements.
It found that 94% of UC recipients with a deduction on their payments went without essentials, as did just over three-quarters (76%) of UC recipients with no deduction.
More than seven in 10 (72%) EC recipients with deductions had been hungry in the previous 30 days, compared to four in 10 (42%) without deductions.
A government spokesperson said: ‘We know people are facing rising prices due to global pressures, which is why we are providing targeted support of at least £1,200 to eight million families in low income – welcomed by the JRF – while helping people earn more, including a tax cut of £300 a year in July and allowing Universal Credit claimants to keep £1,000 more on what they win.
“We have both reduced the amount that can be taken through deductions twice in recent years to a maximum of 25%, and doubled the period of time over which they can be reimbursed.
“It strikes a balance between people keeping a significant portion of their payment and making sure priority debts are paid, like child support which is vital for parents raising children.”