Eye-opening Report Reveals Impact of Cost of Living Crisis on Low-Income Families

Researchers at the University of York have led a series of studies into how rising living costs are affecting households across the country and the evidence highlights how a myriad of pressures are pushing families to breaking point.

Homelessness

Spiralling costs of household necessities, rising energy costs and inadequate social security policies are hitting households with low income hard – this has contributed to an increase in the number of people threatened with homelessness and is having a direct impact on people’s mental health, according to the report.

‘Sticking Plasters and Systemic Solutions: Cost of living responses in the UK’, published by the University’s York Cost of Living Research Group, explores the impact of the crisis from the perspective of families on low incomes, people experiencing fuel poverty and local government.

Local authorities have been at the forefront of the cost of living response, providing advice, innovative new services, and financial support to their communities and delivering key initiatives on behalf of central government.

But the new analysis reveals significant variations in how authorities deliver their support, with consequences for who is getting help and what that looks like.

Lifeline

The Household Support Fund (HSF), which provides local authorities in England with significant additional finance to help support vulnerable households with essentials, has become a lifeline for many people struggling with rising living costs.

However, pressure for rapid roll-out of the scheme has meant that significant variations have emerged in how HSF schemes are organised and has led to failings in providing people with the right kind of support for meeting their needs, according to the research.

A survey of elected councillors undertaken at the start of 2023 exposed concern for specific groups within their communities, including children in low income families, pensioners and those receiving unemployment benefits. The findings showed:

• Eight out of 10 say that children in low income families were at risk of destitution in their area due to the cost of living crisis
• Seven out of 10 say that people in receipt of unemployment benefits were at risk of destitution
• Six out of 10 say that pensioners were at risk of destitution
• Seven out of 10 say their authority would not be well equipped to respond to another financial shock in the future.
• Seven out of 10 say health and social care services in their local authority did not have sufficient resources to cope with the current crisis.

Early data analysis from a more recent survey undertaken in the summer supports the earlier findings, with councillors indicating that living standards have declined in their areas during the previous six months and expressing dissatisfaction with how the government has handled pressures from rising living costs.

Support

The report states that local authority staff delivering financial support schemes have warned that current resources for tackling the cost of living crisis amount to a sticking plaster response upon which residents are increasingly dependent, whilst widespread structural problems in the welfare system go unaddressed.

It also calls into question the current tax and benefits system and makes the case for reversing policies, such as the two-child limit and the benefit cap, to protect families from the worst impacts of the crisis.

Evidence indicates that abolishing the two-child limit and benefit cap could help lift over 1.5 million children out of poverty, which would making a particular difference to households less able to increase their income through employment, including lone parents and families with younger children.

The report also highlights the impact of rising living costs on people’s mental health. The University’s Changing Cost of Living Study, which has been tracing how people’s mental health changes in real time as their financial circumstances change, showed that as people’s non-committed incomes have gone down, their depression and anxiety has gone up.

Deprived 

In addition, researchers found a strong association between emergency hospital admission rates and cold weather days. This association was stronger for more deprived areas, especially the most income deprived areas.

The authors of the report say the current approach to the crisis isn’t working and the social security system is in ‘desperate need’ of reform to address the deep social inequalities and persistent gaps in the UK’s social safety net.

Further findings include:

• The benefit cap affects an estimated 114,000 households and 280,000 children – with families losing £50 per week on average
• One in 10 children (1.5 million) live in families affected by the two-child limit
• 110,000 children (32,000 households) are affected by both the benefit cap and two-child limit
• One in 10 households are affected by fuel poverty
• Three in 10 lone parent households with two or more children are in fuel poverty
• One in three households in fuel poverty have been ineligible for Westminster government cost of living mitigations.
• Of the poorest 10% of households, more than one in six are in fuel poverty
• The fuel poverty rate in households where the ethnic origin of the head was Black or Black British was almost double (27.7%) that of households where the head was White (14.2%)
• Social renters were more likely to be in fuel poverty than owner occupiers or private renters.

Professor Kate Pickett, Professor of Epidemiology in the Department of Health Sciences at the University of York, said: “Our ongoing research shows that even before the current cost of living crisis many people, particularly those on low incomes, were already at breaking point. Having to make trade offs between heating their home or putting dinner on the table shouldn’t be a choice anyone has to make.

 “Rising costs have exposed the deep-rooted inequalities across our communities. The current crisis combined with cuts to social security benefits over the last decade have fallen unevenly with the poorest households suffering the most.

“Our research highlights the important role of local authorities in providing on the ground support to people struggling within their communities. But it also exposes the unrealistic expectations placed on local governments’ capacity to deliver.

“Income insecurity, fuel poverty, dependency on crisis funds, and homelessness are related problems and they cannot be addressed through discrete policy initiatives. The recommendations in this report make it clear that there needs to be a complete redesign of the social security system that puts the people it serves at its centre. However, we know that this will take time and immediate action is needed to offer a lifeline to those who are struggling the most during the crisis. This includes scrapping the two-child limit and benefit cap, widening eligibility for energy relief measures, and giving local authorities stable, long-term and predictable funding to deliver the best support to their residents.”

Measures

The report authors are now calling for structural reform and redesign of the tax and benefit system to centre the rights of the people it supports, ensure dignity, and a decent standard of living for everyone in the UK. It also recommends interim measures that could make an immediate impact ahead of wider reform.

The long-term recommendations are:

1. Establish the right to a sufficient income in law by legally tying rates of social security support to the cost of living.
2. Establish the right to a secure income by removing the mandatory assessment period for Universal Credit.
3. Invest in local expertise to meet specific needs by committing long-term funding for local authorities to provide targeted additional support in their area.

The immediate measures are:

1. Reverse rising child poverty by removing the two-child limit and the benefit cap.
2. Strengthen protections against fuel poverty by widening eligibility for energy relief measures and exploring targeted energy pricing support through social tariffs.
3. Bring in a stable and predictable funding package for local authority welfare provision by committing to a further 5 years of the Household Support Fund.