Debt piling up in UK’s poorest households

Debt piling up in UK’s poorest households

Monday, 22 January, 2018

Today, the gap between the richest and the poorest residents of the UK is wider than ever before.

And with unemployment set to rise – along with reliance on the irregular income streams of the gig economy – things aren’t set to get better any time soon.

But with living costs constantly on the rise, how are the poorest households in the country managing to stay afloat?

Bills, bills and more bills

Unfortunately, recent research has revealed that they are descending further and further into debt – and are often behind on repayments and bills.

In January 2018, the Institute for Fiscal Studies released the results of a study funded by the IFS Retirement Savings Consortium and the Joseph Rowntree Foundation.

In it, they analysed data on the incomes of a large representative sample of UK households between 2006 and 2008, then again from 2012 to 2014, hoping to identify the circumstances in which debt can become a problem.

More: 25% of all homeowners suffer depression, anxiety over rising bills

And for the poorest earners in the country, the results looked bleak.

According to the research, around one sixth of the lowest-income tenth of UK households are in arrears, unable to keep up with debt repayments and bills. What’s more, a further 10% were found to be spending over a quarter of their entire income on debts.

Taken together, these statistics reveal that approximately 25% of the UK’s lowest income households are struggling with debt. And while some 60% of higher earning households were also shown to have debts, the majority owned enough financial assets to pay them off.

£19,000 debts each

Speaking to The Guardian in December 2017, Labour’s Shadow Chancellor John MacDonnell warned of a personal debt crisis in the UK.

Analysis by the party’s financial mandarins found the average household has unsecured debts of £14,000. This is slated to rise to £19,000 by the end of 2020.

The IFS research paper reveals that lower income households are less likely than higher earners to get themselves into debt.

However, they were more likely to be struggling with ‘net debt’ – meaning debts of greater value than the household’s combined financial assets. Apparently, some 35% of the lowest-income tenth were in this situation, as opposed to just 10% of the highest-income tenth.

But short of a drastic redistribution of wealth, what can the country’s lowest earners do to get themselves out of the cycle of debt?

Although it won’t tackle the root of the problem, cutting down on household bills can help to free up some income for other essentials.

Something as simple as switching broadband can have a huge knock-on financial effect.

Cut your monthly bills with a better broadband deal

Please enter a valid postcode to check availability in your area.

MAIN IMAGE: Jeremy Sutcliffe/CC BY-SA 2.0

Suzi Marsh author picture

By:

Suzi Marsh is a freelance writer and blogger based in South West England.

News What's the story?

Keep up with the latest developments in UK broadband.

The rise of cryptocurrency scams: don’t get mugged

The rising interest in Cryptocurrency is leaving consumers vulnerable to scams.

The rise of cryptocurrency scams: don’t get muggedThe rise of cryptocurrency scams: don’t get mugged Read more

Hyperoptic welcomes new investment from KKR.

Leading global investment firm acquires the majority stake of UK ISP Hyperoptic after they announce plans to quadruple fibre coverage.

Read more

Post Office officially the UK’s cheapest broadband deal

The latest victory in the price wars goes to Post Office with an amazing introductory offer for just over £15 a month!

Read more

Plusnet price hike warning

Incoming broadband and phone price rises before Christmas

Read more

Help Learn with us

Make the most of the internet with our broadband library.

Search engine alternatives to Google

Are there other options or is Google a search monopoly?

Search engine alternatives to GoogleSearch engine alternatives to Google Read more

The top online scams affecting Millenials – and how to avoid them!

Cybercrime is becoming more sophisticated every year - here are the current most frequent scams affecting millennials!

Read more

Is your faster broadband fast enough?

Read more

The differences between uploads and downloads

Read more