One in five people struggling to keep heads above water

Almost one in five people (18%) are finding it increasingly hard to afford essentials such as food and energy bills, according to new polling from independent think tank, Resolution Foundation. With the recovery remaining highly fragile and new cuts to tax credits starting to bite, the number of those expecting their financial situation to get worse in the next year has risen to more than one in four (27%).

The poll, the fourth in a new quarterly tracker of household finances, carried out by polling firm Ipsos MORI, comes ahead of key GDP figures to be released next week. The results suggest household spending—which makes up two thirds of GDP—will remain under great pressure, and chimes with this week’s unexpected upward tick in inflation, driven by increases in the costs of food and clothing, and fall in earnings growth.

The poll also finds that:

• People are more pessimistic about their financial situation than six months ago – the proportion of adults expecting things to get worse has risen to 27%, up from less than one in six (15%) in October 2011, and 23% in January 2012.
• Nearly a third (32%) of adults in the very poorest households are struggling to afford essentials, compared to 18% of those on low to middle incomes and 6% of higher income households.
• Around a third of those on below average incomes expect their financial situation to worsen, compared to 16% of people living in high income households.

Gavin Kelly, Chief Executive of the Resolution Foundation said:

‘This news is especially worrying as it suggests consumers are still under great strain as inflation remains stubbornly high and earnings growth is on the floor. Many low to middle income households are already struggling just to stay afloat and will see yet another fall in their real wages this year alongside big cuts to tax credits.’

Notes to editors

1. Polling of 2,000 British adults carried out face to face by Ipsos MORI during 30 March – 5 April 2012. Data are weighted to the national profile.
2. Low to middle income households are defined at those with household incomes below the UK median – but excluding those with household incomes equivalent to the bottom 10% of working age households – and adjusted for household size. This equates to a gross household income of £12-30k for a couple with no children, £24-42k for a couple with 2 children and £30-48k for a couple with 3 children. Poorest households are defined as those below these income brackets, and higher earners above. Polling figures by household income exclude those who declined to state an income.
3. The Resolution Foundation is an independent think tank working to improve the lives of people on low to middle incomes. This includes 11 million adults in 6 million households in the UK www.resolutionfoundation.org