Four million people in England and Wales are in households trapped in a negative budget, meaning that they spend more on essentials than they earn, Citizens Advice has warned.
At a time when bills for food, energy and housing are all increasing, the debt charity said that on top of the millions who are stuck in the red a further 580,000 were at risk of falling into crisis, with just £50 left at the end of the month.
Those who needed to service existing debt were falling further behind, it said, as the cost of essentials outstripped their income.
The figures are based on analysis of spending data from the Office for National Statistics and information collected by the charity from its clients.
The charity found that private renters and single parents were particularly likely to be struggling with the cost of living.
Yvonne Parks, a debt team manager at Citizens Advice South Gloucestershire, said: “I have been a specialist debt adviser now for 30 years and, although there have always been clients with negative budgets, these were the exception.
“Now we are seeing around half of all debt clients stuck in the red.”
Parks cited the example of a nurse who was struggling to make ends meet, even though she was working overtime. “Her rent is over half her take-home pay – and that is not unusual,” she said.
Citizens Advice said in the 2024-25 financial year the average deficit for households in a negative budget was £343, but for the 2025-26 financial year that was set to rise to £396.
More than half of the people the charity helps with debt are in a negative budget. Their average household debt is £9,963.
This month, energy bills for a typical household rose to the equivalent of £1,755 a year for dual fuel while food inflation has begun to increase again. Figures for August showed food prices were up by 5.1% year-on-year, with sharp rises in the cost of butter, coffee, chocolate and beef. Official figures released in the summer showed that rents are taking up an increasing part of tenants’ incomes.
The charity is calling on the government to take action in the autumn budget to help those who are struggling. It wants to see targeted utility bill support, an increase in local housing allowance and the end of the two-child limit on benefits.
Dame Clare Moriarty, the chief executive of Citizens Advice, said: “Four million people have simply run out of options and many others are on the cusp of crisis … 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.”
She added: “The Labour government came into office with big promises on living standards that it’s yet to deliver on.”
