A survey conducted in 2011 by the Department for Work and Pensions found that:
“There was an equal split between those who said they run out of money before the end of the week/month always or most of the time (34 per cent), those who run out of money more often than not or sometimes (33 per cent) and those who said they run out of money hardly ever or never (31 per cent)” (p. 4).
So, overall, 67% of benefits claimants clearly struggle with their household finances. Is this merely due to poor budgeting? No: it is because low incomes are insufficient to meet peoples’ requirements. As the DWP report makes clear, benefits recipients are actually very adept at budgeting:
“About two-thirds of respondents (68 per cent) said that they regularly work out how much money they get from work, benefits and tax credits and how much they are spending. This happens either at least weekly (49 per cent), fortnightly (17 per cent), monthly (29 per cent) or less often (four per cent)” (p. 4).
This data was compiled for the DWP by the polling institute, Ipsos Mori; who themselves noted a year later:
“It is a myth that people on low incomes are poor budgeters – they are usually better than most at managing their money because they don’t have the luxury not to. To avoid real hardship, daily efforts and routines are needed to source the cheapest goods, anticipate spending needs and make delicately balanced decisions about where money should go. Apportioning of income and payments is usually a central part of the best strategies, as it reduces the risk of over-expenditure and offers confidence about how much money is available for discretionary spending. Benefit payments that are regular help this process because they have a natural rationing and restraining effect. In addition, because payments are never more than a few days away, there is less risk of a serious shortfall”.
However, a major stumbling-block for people in these circumstances are “substantial debts accrued during more prosperous times”. These become self-perpetuating, because missing payment deadlines or living beyond means incurs more penalties, and further debt:
“Low-income families struggle to find financial stability, as any small shock to their income – such as a late payment fee – has a severe impact. Many are excluded from mainstream financial services, and borrowing can become routine often through the alternative credit market: pawnbrokers, retail credit and payday loans”.
The DWP outline the demographic principally affected as follows:
“The proportion that runs out of money always or most of the time was highest among JSA claimants (48 per cent), black respondents (60 per cent) and those without formal qualifications (39 per cent). By age group, it was highest in the youngest age band (16-19) and lowest in the oldest (60+).It was also higher among those renting their home, while lowest among those who own their home outright. Running out of money was also more common among those out of work than those in work” (p. 56).
‘The Impact of Universal Credit’ by Caroline Booth/Ipsos Mori; 28th September 2012 http://www.ipsos-mori.com/newsevents/blogs/thebigsociety/1182/The-impact-of-Universal-Credit.aspx
‘Work and the welfare system: a survey of benefits and tax credits recipients’ by Trinh Tu and Steven Ginnis/Department For Work And Pensions; June 2011: http://research.dwp.gov.uk/asd/asd5/rports2011-2012/rrep800.pdf