The Weekly paper of the New Communist Party of Britain
Week commencing 19th January 2018

Hardship ahead for low income households

LOW INCOME households in Britain will face increased hardship through 2018 as the cost of living continues to rise faster than the value of wages or benefits, according to a report issued on 11th January by the Joseph Rowntree Foundation (JRF).

Average price inflation for Britain stands at its highest since April 2012. But it’s not just price inflation that’s hitting low-income families hard, says JRF spokesperson Laurie Heykoop.

For most of last year, price rises outpaced wages, especially in sectors such as retail and hospitality, which employ many low-income workers. The financial pressure is even worse for low-income families receiving working-age benefits and tax credits, frozen since April 2016, and they are paying more in five key areas, including:

Paying more for public transport

Train price rises have received a great deal of media attention, but bus and coach transport are often more important for low-income households, especially outside London and the South East. The cost of bus and coach travel has increased by a huge 13.9 per cent in the last year.

Low-income households that regularly use buses will pay an average additional £116.15 per year for their fares in 2018. Transport costs or availability can have knock-on effects if they restrict people’s ability to reach better-value shops, jobs or services.

Keeping bus travel affordable is vital to enable people on low incomes to buy low-price food, get and keep jobs, and access health and other services.

Paying more for food and energy

In addition, the cost of some essential goods and services has been rising even faster than average inflation. Energy bills have increased by 6.4 per cent since last year, with electricity alone increasing by a massive 11.4 per cent. Typical households in the bottom fifth of incomes will now be paying £61.86 more compared with last year for the same energy use.

Food prices have also been rising faster than average, at 4.3 per cent over the last year. It will cost an additional £67.81 per year for a family in the poorest fifth for the same weekly shop in 2018.

These price rises hit poorer households especially hard. Households in the bottom fifth of income spend twice as much of their income on food and fuel compared with households in the top fifth. Just to cover those food and energy basics, families will need to find an extra £130 this year.

Low income households that are in debt will face even harsher times.

Responding to the Institute of Fiscal Studies (IFS) report published last week on problem debt and low-income households, Helen Barnard, Head of Analysis at the JRF, said: “More than one in five people on low incomes have problem debt compared with just one in 20 of those at the top of the income scale. This is putting huge pressure on household finances: on average, those with problem debt in the bottom fifth spend £457 a month on paying back their debts, out of an income of £1,012.

“Low income household are facing a difficult 2018, with rising prices, frozen benefits and a wage squeeze all putting further pressure on household incomes. The Government, regulators and lenders need to not only look at increasing access to affordable credit, but also at the financial pressures that can lead families to take on debt in order to get by.”

This is bound to be made worse by the continued roll-out of Universal Credit to replace tax credits, housing benefit and other means-tested benefits. Households and individuals will face a five-week gap between their existing benefit ceasing and their new one starting, with no back payment to cover the gap. And claimants are being urged to take out loans to cover their essential needs during the gap.