Is ‘just managing’ getting harder?

Last month, Ofgem released its annual report on vulnerable consumers and the social obligations of energy suppliers. One finding in particular stood out, about the levels of debt that customers were in.

Citizens Advice help thousands of people with energy debts every year, so this change is obviously important for how we work and the people we help. If this was something specific to the energy market, it would be an interesting change with limited wider impact. But there is growing evidence that financial difficulties are affecting fewer people, but hitting those affected harder. Problems are getting narrower but deeper.

For instance, the Family Resources Survey collects data on the number of people in arrears with domestic bills. Generally, this number has fallen in the last couple of years, although the number of families in arrears with council tax has risen. But if we look at low income families in arrears with 2, 3 or more bills, we see small rises.

Low income families in arrears with multiple bills

This graph shows the very recent trend for two lower income groups — those with a disabled adult and those in the bottom fifth by income. In both cases, there have been rises in the numbers of families behind on 3 or more bills in both of the last two years. Over the same period, the number of these families in arrears with just one bill has fallen.

Similarly, if we look at income poverty, the total number of people falling below the poverty line (60% of average income, adjusted for household size and housing cost), we see the number coming down. If we look at more severe poverty — below 50% of the median, or even 40% — we see small rises. What that means is while the overall population has seen no increase in poverty, the average experience of poverty is harsher now than it was three, four or five years ago.

Moreover, we are seeing evidence of this intensification among our clients at local Citizens Advice. Last year we saw over 2 million people face to face and offered advice across a range of issues from housing to debt to consumer problems and family law. On average, each person we see has more than one advice ‘issue’ — a couple of different debts, for instance, or a housing problem and work problem. The number of issues per client appears to be rising.

Issues per client at local Citizens Advice, quarterly since Q1 2014

There are a couple of caveats at this point. Firstly, the overall rise is not huge and there appears to be some seasonality in the data — issues per client go up over the winter and down over the summer. What this amounts to is a difference of 0.12 issues per client between June to September 2014 and June to September this year. Roughly every eighth client is presenting with an additional problem.

The way we record ‘issues’ locally may impact on the figures in the graph but we have tried to remove some of the topics that would bump the number up — our Pension Wise advice is wide ranging so we’ve taken that out of the calculation. And advisors may just have got better or more assiduous at recording the advice they give.

Looking beneath the total, we found different rates of change for different types of advice. Housing and benefits are a substantial part of our workload in local advice centres, but the issues per client related to those problems have not rise. The rise has been mainly in debt and utility related issues, which chimes pretty closely with what Ofgem are saying.

None of these stats form a knock down argument by themselves but together they sketch out an emerging picture. Frequently in policy making and analysis, the number of people affected is the important figure, not the amount of hardship or detriment they are facing. This is important to think about when addressing the Prime Minister’s framing of trying to help people who are ‘just managing’.

There are two reasons for this. Firstly, while policy solutions should always try and improve people’s material situations, they should also address the detriment associated with that position. So if you have a low income it might be good if you were able to work more hours and earn more money, but until that happens, there’s no reason why you should pay more for your energy bill, or live in a damp home. People on lower incomes, whether just managing or not, get a bad deal in a range of markets. Policy can address that as well as dealing with the low income itself.

Secondly, it would be a mistake to think that these families are somehow distinct from those the Prime Minister has in mind. The line between just managing and not managing is thin — a lost job or a bout of ill health could quickly mean a family goes from getting by to being in serious financial distress. One of the best things the government could do for just managing families would be to offer them the security that things are not going to get worse.