Politicians ‘burying their heads in the sand’ as new research finds millions are in the red

  • Five million people in the red with an additional two million people cutting back their spending to unsafe levels in order to not slip into a negative budget

  • Soaring housing and energy costs driving people into the red - with private renters worst off

  • Average households in the red are £4,200 short of the cost of essentials every year

Alarming new research from Citizens Advice has found that five million people are in a negative budget, as the charity warns a living standards catastrophe is becoming the new normal ahead of the general election. 

The charity's new analysis shows that the number of people in the red has jumped from 3.25 million since the start of 2020. That’s more than 50% in just four years. Currently, that includes 1.5 million children living in a household that has more money going out than coming in. 

Housing and energy costs are swallowing up people’s income, pushing many into the red. Private renters in a negative budget are spending nearly three-quarters (73%) of their income on these two costs alone, leaving little for other essentials. While mortgage holders in the same situation are spending 43% of their income on energy and mortgage costs combined.

Without government action, Citizens Advice predicts over 250 people will fall into a negative budget every day in the run up to the election.

Running to stand still

Citizens Advice says it is seeing more people in full-time work and people with mortgages finding themselves living on empty, cutting back spending to under the bare minimum and going without vital food or heating to stay warm.

The charity’s latest research found that despite falling inflation, the cost of essentials remains stubbornly high with 2.35 million people cutting back on things like meals, energy and seeing friends and family.

For others, falling behind has been unavoidable. In particular, pensioners privately renting are more than three times more likely to be in a negative budget than pensioners generally.

“I'm living on a shoestring” - Alison’s story

Alison* is a widow in her early sixties who lives alone. She has a permanent brain injury which causes health issues that limit what she can physically do.

Before her illness, Alison ran her own cleaning business. Now she is unable to work and receives Universal Credit and Personal Independence Payment. For several years, she received the additional limited capability for work element of Universal Credit - for people unable to work due to their health - and was in a positive budget.

However, last year, her claim was reassessed and she was deemed fit to work. As a result, her monthly income was reduced by around £400. She has appealed the recent decision but while waiting for the tribunal outcome, she cannot make ends meet.

“Since my limited capability for work element was taken away, I'm getting £400 a month less, roughly. Now I'm living on a shoestring.

“I don't buy clothes, I have not got the money. I've only got £40 to last me for the next 12 days.

“As soon as you get any money in the bank, you go food shopping and it's gone. It goes so quick.I have to shop very carefully and I don't go out.”

Action needed more than ever

With a general election on the horizon, four in five (79%) voters say negative budgets are an important issue. But Citizens Advice is warning that politicians are failing to address the root cause of people’s costs far exceeding their income, while resorting to short-term handouts. 

The charity's new research shows that cost-efficient policy changes can be made immediately to turn the tide on living standards. Citizens Advice is proposing a package of support that could lift 1.1 million people out of a negative budget right away. This includes uprating benefits using the Household Cost Indices - a measure that more accurately reflects the rate of inflation for low-income households - as well as improving energy bill support and reforming Local Housing Allowance. 

But to ensure living standards are improved in the long-term and at scale, more must be done to deal with stagnant incomes and tackling spiralling costs - crucially the cost of housing.  

Dame Clare Moriarty, Chief Executive of Citizens Advice, said:

“A negative budget is the difference between making ends meet and being pushed deeper and deeper into trouble. 

“Getting people out of the red and into the black is what our advisers specialise in. But they can’t tackle a challenge of this scale alone. 

“For too long politicians have papered over the cracks, allowing a chasm to grow underneath as living standards drop even further.

“Now is the time for bold action to give sustained security to the millions of people living on empty. Policymakers can’t continue to bury their heads in the sand.”

Notes to editors

  1. A copy of The National Red Index: how to turn the tide on falling living standards can be found here

  2. Negative budgets are a simple equation - if subtracting someone’s essential living costs from their income puts them in the red, then they are in a negative budget. The National Red Index uses a combination of expenditure data from Citizens Advice debt clients, and income and expenditure data from the Office for National Statistics’ Living Costs and Food Survey (LCFS), to establish how many people across England, Scotland and Wales are in a negative budget. Specifically, we take the average spent by our debt clients (after they’ve been helped by an expert adviser to cut down their spending) on flexible costs - things like food, clothing and groceries which you can cut back on if your finances are squeezed - and combine it with people’s fixed costs from the LCFS - things like rent and council tax that are hard to change. This gives us an overall figure for spending on essential costs, which we adjust for things like how many people live in the household, where they live, and if anyone in the household is disabled. We then subtract this overall spending figure from income data from the LCFS to determine how many people nationally are in a negative budget. The calculations for 2019/20, 2020/21 and 2021/22 are based on real data from our clients and the LCFS.  To create a dataset for 2022/23 and the current financial year, for which LCFS data was not yet available, we have taken the real data for 2020/21 and 2021/22 and adjusted it by inflation. We have one dataset for which we have used the Consumer Price Index inflation rate, and another for which we have used the Household Cost Indices inflation rate.

  3. The Household Cost Indices (HCIs) offer a more accurate measure for low income households because they include costs excluded by CPI, weight households more equally, and take into account the share of income spent on different things. Most living standards analyses use the Consumer Price Index (CPI) inflation rate. To enable our analysis to be comparable, and to provide a conservative view, we have also used CPI in our analysis throughout our report. We expect these figures to be significant underestimates, as outlined by the comparison between our headline figure based on HCI (5m) and CPI (4.4m).   

  4. The figure for the number of children in a negative budget (1.5 million) was calculated by multiplying 1) the number of households with dependent children in a negative budget (848,049), by 2) the latest ONS figures average number of dependent children per family with at least one dependent child (1.77). As such, the 1.5 million figure only includes dependent children and excludes non-dependent children.

  5. Voter survey data based on a representative poll of 10,100 adults (18+) in the UK conducted by Opinium for Citizens Advice, fieldwork conducted between the 20th of December 2023 to 6th of January 2024.

  6. Citizens Advice is made up of the national charity Citizens Advice; the network of independent local Citizens Advice charities across England and Wales; the Citizens Advice consumer service; and the Witness Service.

  7. Our network of charities offers impartial advice online, over the phone, and in person, for free.

  8. Citizens Advice helped 2.66 million people face to face, over the phone, by email and webchat in 2022-23. And we had 60.6 million visits to our website. For full service statistics see our monthly publication Advice trends.

  9. Citizens Advice service staff are supported by more than 16,000 trained volunteers, working at over 1,600 service outlets across England and Wales.

  10. Citizens Advice is the largest provider of free, multi-channel debt advice. Providing that help gives Citizens Advice unique insight into the types of debts people struggle with.

  11. You can get consumer advice from the Citizens Advice consumer service on 0808 223 1133 or 0808 223 1144 for Welsh language speakers.