This freeze, combined with other austerity measures, has in many cases cut welfare benefits to well below the cost of living.
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Over time, we have seen a noticeable increase in the number of clients we advise who are stuck in impossible financial positions. Clients receiving universal credit often have no money available to repay their debts at the end of each month. They are far more likely to be in a deficit budget (i.e. not enough money to cover higher bills and living costs than income to cover it), and more likely to have more substantial deficits than clients who are not on UC.
Don’t get it twisted; these aren’t cases of profligate spending. This isn’t people spending half their income on a Sky package and blowing the rest on cigarettes; that’s nothing more than an unfair caricature.
This isn’t just below the cost of living, it’s below the cost of existence
I’ve spoken to clients, desperate for help, because they can’t afford to top up their gas or electricity meters.
People with severe illnesses, housebound by a lack of money to pay for transportation. People made ill with worry as bailiffs pursue council tax debts the client can’t pay and has no realistic prospect of ever paying.
People who couldn’t afford to eat if it wasn’t for the kindness of strangers or food banks. People literally having to choose between heating and eating. The kind of stuff you’d associate with an Alan Bleasdale series, or Sue Townsend’s memoirs of the 80’s. Not 21st century Britain!
This isn’t just below the cost of living, it’s below the cost of existence.
The substantial budget deficits we encounter at StepChange mean it’s often impossible to recommend any form of debt repayment.
Instead, the only solutions are informal requests for respite (either offering token offers of £1 per debt, or asking the creditors to agree to a suspension on payments – not an option when dealing with certain priority debts), or pursuing insolvency, even for relatively small levels of debt.
Sadly, in many cases, even bankruptcies or debt relief orders won’t resolve the debt problems for these clients. Without enough money to the cover basic costs of living, there’s a high risk of falling right back into debt, either by falling into arrears with rent, council tax or utilities, or having to borrow further just to survive.
The situation becomes demoralizing for advisors working in the sector too. Putting together budget after budget and realizing the client’s money has already gone before we’ve even got past utility bills!
Seeing a deficit growing higher and higher, knowing what that minus-number means in practice for the person on the other end of the phone. Trying to find ways of increasing income for people who’re sick or disabled or caring for very young children.
I’m not equating the effects of poverty with having to hear about it. But I’d be remiss to not point this out. Inevitably, the work comes home with you, even if it shouldn’t. I know several great people who’ve stopped being debt advisors because of the increased stress of trying to fight hopeless battles and trying to solve the unsolvable.
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The extra money added to universal credit doesn’t address all the problems with the system. But whatever the shortcomings, the additional £20 a week made a noticeable difference to many of our clients.
It was a bit more money in the pot to pay for basic essentials, and some of the sting was taken out of benefit deductions. It was a literal lifeline to many people we work with.
The consequences of this ending cut cannot be overstated. An abrupt cut in October, at the same time furlough is expected to end, is going to throw thousands of households into poverty.
The fact that it doesn’t yet appear to have been directly communicated to current claimants is also going to give a sharp shock to their finances with barely any notice to make adjustments.
From the standpoint of debt advice, this will force more people into positions where they can’t address their debts in the long term. The government must keep the lifeline.
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