“The other day I helped a nurse who is struggling to make ends meet, even though she is working overtime”, says Yvonne Parks, a debt team manager at Citizens Advice South Gloucestershire. “Her rent is over half her take-home pay – and that is not unusual.”
Yvonne’s client is just one of millions who are running into financial difficulties, as new research shows that four million people are losing money every month after the cost of essentials. This includes households with more than 860,000 children, the figures from Citizens Advice reveal.
“I’ve seen it time and time again – missed bills lead to arrears, enforcement, deductions, or credit damage. Stress and poor mental health reduce someone’s ability to manage finances or seek work,” says Yvonne, who has been a specialist debt adviser for 30 years.
“People fall into a cycle of crisis, repeatedly needing emergency help such as food banks, fuel vouchers or help with housing payments.”
These households are trapped in a “negative budget,” the Citizens Advice says, meaning they don’t have enough money to pay for things like food, energy or housing.
The average shortfall for those stuck in this cycle is £343 a month, which can quickly add up to over £4,000 a year. This is set to rise to £396 a months in 2025/26 as costs rise, Citizens Advice added.
This situation is forcing people to make impossible decisions over which essentials to cut back on, or face going into arrears. More than half the people Citizens Advice helps with debt are in a negative budget, the charity says, with an average debt of £9,963 per household.
Around 320,000 people are also at risk of falling into crisis, making up their essential costs by just £50, with the figure set to increase to over half a million (580,000) in 2025/26. It would take just one “unexpected shock” like a rise in food prices, bill increase or rent hike to push these people into debt, researchers said.
Dame Clare Moriarty, Chief Executive of Citizens Advice, said: “Four million people have simply run out of options and many others are on the cusp of crisis. They come to us unable to make ends meet, sinking further into the red every month, and desperate to provide for their families.
“This is the result of years of successive government inaction on living standards and policy decisions which have made life even harder for struggling households.
“The Labour government came into office with big promises on living standards that it’s yet to deliver on.”
The calculations were made using data from Citizens Advice clients, using Office for National Statistics (ONS) data to help it make the projections for England and Wales.
Researchers also point out that private renters and single-parent households are disproportionately more likely to be trapped in a negative budget.
Citizens Advice says that it wants to see Labour use its autumn Budget to provide targeted utility bill support, increase local housing allowance rates that set housing benefit levels, and scrap the two-child benefit cap.
Toby Murray, policy and campaigns manager at Debt Justice said: "These are shocking findings that clearly demonstrate how negative budgets trap millions of people in debt. Around the country, people we talk to are struggling in an insurmountable cycle of financial insecurity and debt.”
“They face sky-high interest payments and intimidating bailiff visits which trap them further in debt, without access to fair write-off mechanisms. The government must use the autumn budget to address debt and its root causes, including the two-child limit.”
A government spokesperson said: “We're committed to breaking down barriers to lift people out of poverty and give every child the best start in life.
“To ease pressure on households, we're tackling rising rents by building 1.5 million homes – including the biggest boost to affordable and social housing in a generation – and expanding the £150 Warm Home Discount to over six million families.
“Our Child Poverty Taskforce will publish an ambitious strategy to tackle the structural and root causes of child poverty, building on initiatives such as our £1 billion crisis support package.
“We're also putting more money in people's pockets by uprating benefits, making Universal Credit fairer, and helping people into good, secure jobs as part of our Plan for Change.”
