Millions struggling to pay council tax and other essential bills, finds annual financial inclusion briefing

According to a report out today from the Centre on Household Assets and Savings Management (CHASM) at the University of Birmingham in 2019:

• Nearly 1.6 million people are falling behind with council tax payments
• Six in ten people in the poorest fifth of the population are in problem debt
• Nearly 2.2 million people say they have been contacted by bailiffs.

The briefing built on six previous annual reports which were commissioned to measure changing levels of financial inclusion in Britain. It presents data from a number of different datasets and where possible, the report shows data from previous years to highlight trends in these indicators.  It found that poverty is rising for all groups – even those in work.

The research from the University of Birmingham and the University of Lincoln shows nearly 1.6 million people falling behind with council tax payments, with six in ten people in the poorest fifth of the population reporting they are in problem debt – mainly council tax payments, rent or utility bills. Nearly one million people are behind with their rent, while more than a million people are behind on water bills.

Financial inclusion had been broadly defined as the ability to: manage day-to-day financial transactions; meet expenses (both predictable and unpredictable); manage a loss of earned income and; avoid or reduce problem debt. In order to achieve financial inclusion, people need both a sufficient level of income and access to appropriate financial services.  This briefing paper therefore begins with a snapshot of the broad economic picture in terms of growth, employment and incomes before focusing on access to financial services.

The 2019 Briefing, found that nearly 2.2 million people report had been contacted by bailiffs and nearly one million had experienced bailiffs breaking the rules. A growing number of personal insolvencies were also highlighted, with over 70,000 Individual Voluntary Arrangements (formal alternative to bankruptcy)  made in 2018, up from 40,000 in 2015.

Karen Rowlingson, Professor of Social Policy and Deputy Director of the Centre on Household Assets and Savings Management (CHASM) at the University of Birmingham and co-author of the report said:

“The government is saying that austerity is over but our research shows that millions of people are still struggling to pay essential bills.  Much more needs to be done to increase income levels to help people make ends meet.”

The report also finds that the number of people without a bank account has decreased to an all-time low of just over one million people.  And some financial institutions are making particularly strong efforts to provide basic bank accounts, including the Co-operative Bank.  But others are doing relatively little.  And, overall, banks are making  an estimated £2.4bn in revenue from unarranged overdrafts with people in deprived areas are more likely than others to pay these fees.

Other key findings:

• The rapid growth in zero hour contracts, witnessed since 2012, has now stabilised at nearly one million people in 2018,
• While the growth in employment is very welcome, average weekly real earnings have still not quite recovered to their pre-financial crash levels.
• Workers in four types of industry have particularly high rates of poverty: accommodation and food services; agriculture, forestry and fishing; administrative and support services; and wholesale and retail.
• The UK’s household savings rate is lower than the EU average and far lower than many of our largest and closest Western European neighbours.
• The last four years have seen a dramatic rise in the number of people with an active private sector pension, from 2.8 million in 2013 to 8.8 million in 2017.
• From April 2019, the minimum contributions to workplace pensions increased from 5% to 8% (2% to 3% for employers and 3% to 5% for employees).
• Only 6 in 10 working-age adults had home contents insurance in 2017/18.