IFS - Post-lockdown increases in arrears on household bills worsened further in May, with no sign of recovery in incomes

29 Jun 2020 03:20 PM

Abrupt falls in employment, earnings and incomes seen in April after lockdown showed no signs of unwinding in May. Meanwhile, non-payment of household bills, which had already increased sharply after lockdown, increased further between April and May – suggesting that some households are increasingly struggling to make ends meet as the crisis persists.

These are among the conclusions of new IFS research, funded by the Standard Life Foundation, using real-time bank account data from budgeting app Money Dashboard.

By May 2020, when compared with what we would have predicted just before the crisis hit based on trends up to that point:

Other key findings include: 

Isaac Delestre, a Research Economist at IFS and an author of the research, said: 

"Earnings have been hit very hard for those who came into the crisis with the fewest resources. The picture has been much more even so far when we consider total income, rather than just earnings, which highlights the crucial reliance we now have on our benefits system to contain poverty and inequality."

"This still provides plenty to worry about for the lowest-income households in the longer term: not least given the career disruption they are experiencing and the fact that temporary increases to benefits made during the crisis are set to expire next spring. In addition, we see rises in non-payment of bills – especially among poorer households – and this worsened further in May. These represent substantial additional debts being carried forward. All this underlines the crucial importance of securing a labour market recovery that is as swift as possible, compatible with public health requirements."

Mubin Haq, Chief Executive of Standard Life Foundation, funders of the research, said:

"The Government’s economic response to the pandemic shows bold action can make a big difference to many of those struggling to make ends meet. As debts build up and a jobs crisis looms, we need to see further swift and decisive action. Our safety net has had some emergency repairs but it still has a number of holes which many are slipping through."

The effects of coronavirus on household finances and financial distress