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The ‘just about managing’ households set to plunge into a cost-of-living crisis

1 in 4 people in the UK won’t be able to afford their energy bills in October

Our new analysis out today shows that, based on current price forecasts1 in 4 people in the UK won’t be able to afford their energy bills in October. When the price cap rises again in January, this figure could jump to an astonishing 1 in 3 (34%). Our latest data dashboard continues to show how demand for our help is unprecedented.

People on the lowest incomes face significant shortfalls in their budgets and may not have savings to fall back on. But a new group of people, who would otherwise be more financially stable, will fall into hardship. We estimate that over half of the people who won’t be able to pay their bills aren’t eligible for the government’s targeted support to people on means-tested benefits. Most of these households earn less than £30,000 a year and are in work.

We have been speaking to people in vulnerable situations for the last year as part of a research project to understand the lived experiences of the cost-of-living crisis. But to better understand the experience of those ‘just about managing’, we spoke to people not traditionally seen to be in immediate financial difficulty about their experiences over the last 12 months. Here’s what we found out:

1. Costs rise but incomes have stayed the same, so people spend and save less

Households have seen prices increase over the last 12 months but their incomes have remained the same. Almost all income goes on household bills and other necessities, leaving little or nothing at the end of the month.

“Because the cost-of-living has gone so high, the majority of my wages are spent on household bills like electricity, gas, rent, council tax. Everything has just gone ridiculous. So I’m struggling really […] because there’s just not enough to keep your head above water. I’ve never been in this situation before.”

Michelle, 51

2. People have a worse quality of life, affecting mental health

For many households lifestyle changes made in response to price increase have impacted their mental wellbeing. Many are foregoing things that used to bring them pleasure, including socialising.

“I’m struggling to do anything other than the bare minimum. I’m barely affording anything other than the necessities; quality of life isn’t great when you can’t get out and do anything.”

Hannah, 41.

3. Energy prices are forcing households to ration their usage

Our research has found that, in response to unmanageable price increases, households even on higher incomes are turning to more extreme measures to save money. Some might just heat one room, stop using appliances, or reduce the amount of baths and showers they have.

“If I’m cooking something and I know […] I’m having jacket potatoes the next day, I might stick them in the oven at the same time and literally heat them up the next day, because that means you’re just using [the oven] once.”

Michelle, 51.

How to help households ‘just about managing’?

Looking ahead to the winter, many households who are now ‘just about managing’ see the price cap increase as a significant turning point into real hardship. It’s vital that the Government and regulators keep these households in mind when designing solutions to address the cost-of-living crisis.

While the focus needs to be on boosting the incomes of the poorest households through benefits, we know that huge numbers of people will fall into financial stress and are not eligible for support via benefits under current thresholds.

Some options for supporting these under-reached groups could include targeted support via a child benefit grant, or rebate to basic rate taxpayers. We’re also calling for a winter ban on energy companies forcibly switching customers to prepayment meters, which should protect anyone who falls into arrears.

Ultimately, support needs to target those who need it most and meet the scale of the challenge — and that means new ideas on the table to boost incomes and reduce costs.

With thanks to Farhana Begum for write-ups of the qualitative research.

*‘This study has been conducted on behalf of Citizens Advice by Blue Marble Research and includes 4 in-depth interviews with each household, alongside other check-ins and income and expenditure tasks.

**Names have been changed to protect the anonymity of interviewees.

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