The UK is facing a new “winter of discontent”, experts have warnedas, as a record number of low-income families are driven into poverty.
A major report from the University of Birmingham’s School of Social Policy suggests the poorest households in Britain are set to be “crushed completely”, with financial challenges having seen reliance on additional support such as food banks soar to unprecedented levels across the country.
With rising inflation brought about by the Brexit vote’s impact on the pound having further reduced levels of real pay and placed more strain on household budgets, the report warns that millions are still struggling to make ends meet.
It reveals that many people who have tried their best to work and save since the global financial crisis have barely returned to the situation they were in nearly a decade ago, with a sharp rise in the number of people who said they would be unable to find £200 to meet a one-off expense.
One in five Britons believe they are now more likely to lose their jobs, the findings show — a pessimism researchers attribute in part to fresh uncertainty brought on by the UK’s imminent departure from the EU.
The study found that almost half of those surveyed (46 per cent) believed the outcome of June’s General Election would make their household’s economic situation worse, while 35 per cent believed the result of the poll would make no difference to their financial fortunes and just 6 per cent thought they would benefit over the next 12 months.
The report’s co-author, Professor Karen Rowlingson, of the University of Birmingham’s Centre on Household Assets and Savings Management, warned that unless there are changes, the UK would fall into a “winter of discontent” akin to that in the Seventies, which saw widespread strikes by trade unions demanding larger pay rises.
“Things have definitely got tougher. Five years ago the situation was improving for some people, but in the past two or three years, as we can see from all sorts of data, things have clearly taken a turn for the worse,” she said.
“Unless things change, the outlook for a lot of people appears very challenging – so much so that we could be about to enter a new winter of discontent.
“Since the global financial crisis many people have done their best to work and save – yet today, after nine years of lost growth, they’re maybe only back where they started.
“If the current state of play continues then the people in the ‘squeezed middle’ could be more squeezed than ever – and the people at the very bottom may well be crushed completely.”
The report, which is released annually and has come to be widely regarded as the foremost source of information and insight on financial inclusion in the UK, acknowledges several positive trends, including falls in unemployment, insolvencies and mortgage possessions and a rise in workplace-based pensions.
But it highlights many more negatives, including declining wages and savings rates, rising levels of personal debt and higher inflation placing greater strain on family budgets.
As a result of these and other factors, the report’s authors say more households are facing a “real struggle” to make ends meet and cover one-off expenses.
More than one in five people (22 per cent) were living in poor, low-income households last year — a rise on the 21 per cent figure in 2013-2014. Of these, more than half (55 per cent) of those in working families are now living in poverty – marking a record high.
With this rise in poverty, there has been a dramatic increase in demand for emergency food and support, with food bank provider the Trussell Trust providing three-day emergency food and support to more than 1.2 million people in the past year, compared with just over 61,000 in 2010-2011.
The so-called “poverty premium”, which forces the poorest members of society to pay more for goods and services than those who are able to pay upfront, remains a key issue.
Professor Rowlingson, a Professor of Social Policy, also warned that the universal credit system of benefit payments could prove “catastrophic” to debt levels if implemented as planned.
“We can clearly see from the latest available data that the people at the bottom are being pushed further down, and benefit changes are only likely to make that even worse,” she said.
Report co-author Professor Stephen McKay, a distinguished Professor of Social Research at the University of Lincoln, warned that the gpa between the richest and poorest in society was growing, with others being “squeezed” in the middle.
“The gap between the haves and the have-nots is growing. While those at the top have improved their position relative to others, we’re seeing a higher proportion of people struggling at the bottom and being squeezed in the middle,” he said.
“People are generally more pessimistic about the future following the Brexit vote. This provides even more impetus to tackle the fundamental causes of financial exclusion.”
The authors are now calling for the new Parliamentary Under-Secretary of State for Pensions and Financial Inclusion, Guy Opperman, to formulate a new strategy to improve levels of financial inclusion.
They argue that this should be in line with the recommendations of the recent House of Lords Select Committee on Financial Exclusion.
The latest figures show that more than 1.5 million adults in the UK personally lacked access to a bank account in 2015-2016, with the savings ratio falling to a new low in 2016 at 3.3 per cent, compared to 11.5 per cent in 2010.
In 2017, more than one in five (21 per cent) of people said they would need to borrow money to meet a one-off expense of £200, while 11 per cent said they would not be able to meet this expense.
Responding to the findings, a Treasury spokesperson said: “We realise some families are concerned about their daily cost of living.
“That is why we are helping them keep more of what they earn by cutting taxes for over 30 million people, raising the National Living Wage and introducing a cap on payday loans.