As well as being the year when we learn to live alongside the virus, 2022 looks set to bring particular challenges to low-income households.

  1. Rising living costs, particularly energy bills will put more pressure on low-income families
  2. A fair and equitable recovery is needed if the financial burden is not to fall predominantly on low-income families
  3. Debt and access to benefits will be a catalyst to engage low-income families who are already struggling

This blog explores these challenges and looks at the mitigating actions that central and local government, and their partners, can take to make a difference.

Challenge 1: Rising living costs, particularly energy bills

Headlines are dominated by news on the rising cost of living and inflation across the UK.

  • The Bank of England projects that inflation is going to rise further, reaching as much as 6% in the spring
  • The energy price cap is expected to rise by 12%, meaning households will face their highest energy bills when this comes into effect in April
  • The IFS reported today that benefit levels would fall in real terms by 3% unless additional action is taken; they highlight that the Consumer Price Index (CPI) inflation has risen to a level not seen since December 2011

These cost increases and income reduction will make it harder for households to recover from the pandemic, making access to support more important than ever.

Challenge 2: A fair and equitable recovery is needed

The pandemic highlighted how any of us could experience an income drop and need to turn to the social security system for support.  However, the impact of the pandemic has been far from equal as our evidence to support the retention of the £20 uplift to Universal Credit highlighted.

Many people who were able to work from home saw their living costs fall, and people in work whose jobs were suspended because of the pandemic were supported by the furlough scheme which was relatively more generous than the existing benefit system.

People on Universal Credit or Tax Credits received an additional £20 per week, while people out of work on legacy benefits received almost no additional support, and many others fell through the gaps in support that were made available.

We learned much about the benefit system that we want to see. The challenge for Government is to develop policies that focus support on those most heavily affected, and those struggling from the impact of the pandemic.

Challenge 3: Debt and access to benefits

The unequal economic effects of the pandemic, combined with high and rising living costs, mean that without access to additional support, many people will fall into debt. Others will fall deeper into debt.

Over one-fifth of UK households have less than £100 in savings to cushion themselves against economic shocks. The average total debt per UK household is £62,965. Improving the lives of people who are struggling with debt has long been a priority for Policy in Practice, and we have been working hard on solutions to help. We won a place on the Crown Commercial Service’s Debt Resolution Services Framework to give joined-up benefits and debt support to struggling families.

Debt is not about numbers, debt is about people, behaviours and circumstances. We fix debt problems by focusing on people.

Steve Coppard, Deputy Director, Government Debt Management, Cabinet Office

How central and local government should respond

High and rising living costs require long-term policy solutions to address the challenges we’ve explored. These solutions should focus on improving the housing market and energy security, and establish an holistic approach to collections across government.

Without immediate action to tackle the challenges for 2022 we can feel powerless but there are actions that government can take now.

At a policy level our own analysis about building a pathway out of poverty recommends targeting support to families in need, via the benefit system, as the best solution to the current cost of living crisis. The IFS today called for a 6% increase in benefit levels, rather than the 3.1% planned.

On a more practical level the government can do much more to proactively identify and engage with households who are struggling with the cost of living. Sharing more data with local authorities will allow them to identify households that are struggling financially, and target support more effectively.

Action 1: Mitigate the effects of rising energy bills by helping people to access:

Action 2: Ensure a fair and equitable recovery through:

  • Government investment in employment opportunities, and councils and support organisations identifying people who are out of work and offering employment support (see our case study featuring Rotherham Council’s work)
  • Support for people who are in work and struggling financially by helping them to access additional support through the benefit system, and through other sources like social tariffs
  • Boost the local economy through take-up of benefits

Action 3: Ensure debt does not push people further into poverty through:

  • Maximising income alongside offering debt support and advice to prevent financial crises which are linked to poor health outcomes
  • Targeting support for people who are financially vulnerable, already struggling to make ends meet and who have a limited ability to pay
  • Tracking the impacts of policy and the effectiveness of interventions designed to deliver holistic support (see our ReImagine Debt case study) to make the case for prevention

How Policy in Practice is tackling these challenges

We have invested in our Benefit and Budgeting Calculator to provide a digital tool that gives income maximisation and debt support in one place for the first time. We are working closely with utility companies to highlight social tariffs in our calculator, helping households to bring the cost of their utility bills down.

The calculator is fully Standard Financial Statement (SFS) compliant. This means clients will be able to produce a Standard Financial Statement in the format recognised by the debt advice sector which reduces the number of times a person has to tell their story in order to get access to the support and guidance they need.

2022 is going to be a year with many challenges. No doubt as the true impact of the pandemic is understood that there will be more challenges down the line. However, councils and other support organisations can act now, and Policy in Practice’s tools can help.

Next steps

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TitleDateStart TimeDurationRegister
How to identify and support Just About Managing households using data The government has said it wants to make life easier for the 'squeezed middle' or people who are just about managing. These are the families who are not rich and they are also not those on the lowest incomes. Despite most being in work, they are struggling to meet their cost of living and it is no wonder.

The cost of living hit a 30-year high in February with inflation running at 6.2% and outpacing wage growth. Electricity bills were up nearly 20% in the year to January 2022, and gas bills by 28%, with further rises expected. Private rental prices across the UK went up by 2% in the year to January, the highest rate for five years; in the East Midlands that figure was 3.6%.

We know that one in five UK adults (10.3 million people) have less than £100 in savings, one in ten have no savings at all and more than a quarter have less than £500. Many are one broken appliance away from slipping into debt.

Local authorities want to help families who are struggling now to avoid a crisis down the line yet they have little or no visibility over people who are not already claiming benefits. Now though, analysis of other datasets can be used to get a clearer picture of families who are just about managing.

Join this webinar to learn:

- Who is just about managing now but at risk in the future due to the rising cost of living
- Which datasets can be used to identify families in danger of debt
- How local authorities can target support to avert crisis
29/6/202210:30 BST1.3 hours
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