No end in sight for living standards crisis: JRF’s cost of living tracker, winter 2024

As Rachel Reeves unveiled her first budget for the new Labour Government, the 7th wave of our cost of living tracker captured the experiences of low-income households in the UK. Collected between 8 and 31 October, surveying 4,065 households in the bottom 40% of incomes, our key measures of hardship remain entirely unchanged from 6 months ago, despite some key economic conditions easing. We find in October 2024 (see Figure 1):

• 7 million low-income households (60%) were going without the essentials in the previous 6 months, including 5.4 million experiencing food insecurity in the previous 30 days 
• 4.3 million low-income households (37%) were in arrears on at least one household bill or credit commitment. 

There has been no progress on the number of households in arrears, with 4.3 million low-income households (37%) behind on at least one household bill or credit commitment in October 2024, completely unchanged from the 6 months before (see Figure 4a).

Overall low-income households owe around £6.1 billion in arrears across all household bills and credit commitments. £2.3 billion of this is owed on bills with high consequences if you fall behind, including council tax, rent or mortgage payments and energy bills. For example, falling behind on council tax bills could make you liable to pay a years’ worth of council tax immediately. In October 2024 12% of low-income families are in arrears on their council tax, owing an average amount of £540.

Around 1.5 million low-income households (13%) are currently in arrears on their energy bills before we even head into winter. Those who are behind owe an average of around £500, and 58% of these households are in arrears with 4 or more different bills. A member of JRF’s Grassroots Poverty Action Group told us how normally over the summer period they are able to get on top of energy bills they have fallen behind on during the winter, but this summer that wasn’t possible.

Rent arrears also remain stubbornly high, with 18% of renters behind on their rent, largely unchanged since October 2021. They owe an average of £620 in arrears for rent alone. We find 13% of renters prioritised their housing bills over their other bills in the last 12 months, but 38% of those who did that were unfortunately still in arrears with their rent, showing that many low-income renters are out of options. Arrears for mortgage holders have improved however, with 12% in arrears in October 2024 compared to 16% a year ago in October 2023.

Within low-income families, some groups experience far greater risk of being in arrears. Families where someone has caring responsibilities are almost twice as likely to be behind on their bills compared to families where there are no carers (55% compared to 29%), and are unsurprisingly more likely to be going without essentials too (76% compared to 53%).

Other groups continue to be at elevated risk of being behind on their bills, including 66% of households with a black respondent, and 6 in 10 families with 3 or more children (62%) (see Figure 4b). However there are some positive trends with some of the most at-risk groups seeing a sustained fall in the proportion in arrears, including households with respondents aged 18-24, families on Universal Credit and lone parents. While still incredibly high, these are at least moving in the right direction.

As with the overall picture of arrears, progress on the depth of arrears has stalled. There had been a steady downwards trend in the amount of money families owed following a peak in October 2022 of £1,630, but this had stopped in October 2024. Of those in arrears, the average amount owed was around £1,430. In May 2024 we saw a promising sign of the proportion of households behind on 4 or more bills falling, however this hasn’t continued in October 2024 with 3 in 10 or 1.3 million families who are in arrears behind on 4 or more bills (31%) (see Figure 4c). Being behind on multiple lending commitments and bills to different providers negatively impacts people’s credit file and their ability to borrow in future.

Being behind on your bills is one type of debt, while another is where families have used credit to pay for things. Taking on a loan in and of itself isn’t a bad thing, however it becomes concerning when families rely on credit to cover essentials, can only access high-cost credit, or fall behind on repayments.

While many of our key measures of hardship have remained unchanged, the proportion of low-income families who hold loans they took out to pay for essential costs has moved in the wrong direction. In October 2024, 4 million low-income households (34%) held £9.6 billion of loans they originally took out to pay for food, housing or essential bills like council tax or energy (see Figure 5a). This is very similar to a year ago, when 3.8 million low-income households (32%) owed £9.2 billion for these essentials loans. Taking on debt to pay for essentials has not been enough to prevent hardship, with nearly 9 in 10 of these families going without essentials in October 2024 (88%) and 7 in 10 behind on their bills (71%).

In October 2024, 2.2 million low-income families (19%) held high-cost credit loans, from unregulated lenders (loan sharks), doorstop lenders, payday lenders or pawnshops (see Figure 5b). The proportion who hold these loans had been falling since October 2022, but it has now risen for the first time. While the value of high-cost credit and unregulated loans has increased to £3.2 billion in October 2024, it is still lower than a year ago, at £4.1 billion in October 2023.

The total amount of debt across all unsecured loans and credit (see methodology note) currently held by low-income households has also increased in October 2024 to £23 billion, up from £19 billion in May 2024 (see Figure 5c). While still less than the £26 billion peak in October 2022, debt levels are now back to levels seen in October 2023 (£22 billion). The proportion of families who hold each type of debt in October 2024 mirror our findings in October 2023. It is largely the proportion of households holding each type of loan which has driven the total amount of debt held back up, rather than the amount of debt held for each loan type increasing.

During the cost of living crisis there was a tightening in the availability of affordable credit, due to stricter eligibility requirements, high interest rates and regulatory changes. These factors are likely to have contributed to the fall in loans between October 2022 and May 2024. As interest rates now ease, the availability of unsecured credit now appears to be increasing according to lenders surveyed by the Bank of England.

The proportion of low-income families who applied for loans or credit stayed the same from May to October 2024 at 55%, with three quarters of those who applied approved (75%). However there was a decrease in the proportion of those who applied and were declined in the previous 6 months, down from 14% in May 2024 to 9% in October 2024. We will continue to monitor this, a greater availability of credit may allow more families to take on loans, as seen in the reduction in families being refused credit in the last 6 months.

The October 2024 Budget was big in terms of the increased tax take and investment, but in reality will deliver very little change for low-income households. There were some positive changes such as restoring spending on public services, reducing the amount of deductions from benefits and extending the Household Support Fund (albeit at a lowered level). However our modelling shows these changes will only have limited impact for low-income families and Government must go much further to meaningfully shift the dial on hardship.

Using microsimulation modelling we converted macroeconomic forecasts from the OBR into household-level impacts for the bottom 40% of incomes to show the outlook over the rest of this parliament¹. We find that average disposable incomes after housing costs are projected to be £440 per year lower in real terms in 2029, than they are in October 2024. This is largely being driven by rising housing costs, which we can see (from Figure 6a) means that relatively flat gross incomes lead to declining net (post-tax, disposable) incomes once housing costs are taken into account.

Our latest modelling shows the variation in experiences for households across the income distribution. While households across the income distribution are forecast to see their living standards fall throughout the rest of the parliament, households in the bottom 20% of incomes see a significantly larger proportional drop (see Figure 6b).

This story has yet again set out the embedded levels of hardship facing low-income households in the UK, alongside modelling which shows a stark warning that things are projected to get much worse over the rest of this parliament.

JRF is calling for the Government to place economic security for households at the centre of their mission for growth, to place growth on a surer footing and ensure change is felt by households who need it the most.

Firstly, the Government must make immediate progress on bringing down hardship by:

• introducing a protected minimum amount of support 15% below Universal Credit’s current basic rate, as a first step towards an Essentials Guarantee - this would restrict the amount of reductions to benefit payments, including from debt repayments and the benefit cap
• reforming the Household Support Fund and Local Welfare Assistance in England so everyone has somewhere to turn for immediate cash help in a crisis
• unfreezing LHA and permanently relinking it to local rents
• expanding the Warm Home’s Discount, to increase the level of support and widen eligibility to include people in receipt of disability benefits
• increasing the rate of means tested benefits for carers, to help protect those on the lowest incomes from poverty
• from 2025, not pursuing similar cuts to those planned by the previous Government, and committed to by Labour, to Universal Credit’s Work Capability Assessment ‘activities and descriptors’
• scrapping the ‘two-child limit’ on support for children in Universal Credit and tax credits.

Secondly, the Government must also build the foundations of a stronger social settlement that can provide real economic security for families now and in the future. This would mean an Essentials Guarantee in Universal Credit to ensure everyone has a protected minimum amount of support to afford essentials like food and household bills. It would also mean reform to the housing system, including increased funding for social house building. It would mean introducing an energy social tariff, that will support low- and middle-income households through the transition to net zero, by targeting the high and rising energy costs families are facing. It would mean reducing risks for disabled people wanting to work and improving trust in the social security system, by working with disabled people to develop a replacement for the Work Capability Assessment and implementing a comprehensive Work Transition Guarantee. And finally, a rethink of our care infrastructure so that parents have access to the right kind of childcare that allows them to work if they want to, as well as proper financial support for people who need to temporarily step away from work to help care for a loved one.

Together, these changes build strong foundations in the social security system to build lasting economic security for all, so that we can finally stop reporting that 7 million low-income households are going without essentials.

We use households in the bottom 40% of incomes before housing costs, to reflect the same population as the cost of living survey. For the method note on the microsimulation modelling please see Annex 1 in The real inheritance: UK living standards crisis at October Budget.