Labour market Still more to do to address the plight of low earners 25 November 2008 NEWS RELEASE For immediate release: 25 November 2008 STILL MORE TO DO TO ADDRESS PLIGHT OF LOW EARNERS The Resolution Foundation today welcomed much of the Government’s Pre-Budget Report and the breathing space that it offers to low earners: Low earners are more likely to work for small businesses, so the measures to assist small companies should help keep more low earners in work Low earners were among those most seriously affected by the abolition of the 10p tax rate – the extension of the tax rebate will benefit many low earners. Low earning families and pensioners will also have their incomes boosted by the increase in tax credits and benefits Over half of low earners are homeowners – the 3 month waiting period once a customer falls into arrears will provide an opportunity for low earners to get their finances in order Most low earners have high levels of debt and low savings – the £15m for debt services will extend help to many low earners However, low earners remain in a highly exposed position and are particularly vulnerable to the effects of the UK recession: Low earners spend a higher proportion (than higher earners) of their income on essential items that are not subject to the standard rate of VAT, so the VAT cut may have little effect on low earners’ wallets Many low earners do not claim the benefits and credits to which they are entitled, and unless take-up is improved, low earners will not feel the benefits of the increases Low earners need help before they get into too much debt – yet a national Money Guidance service, which could prevent people getting into debt, remains in the pilot stage Sue Regan, Chief Executive of the Resolution Foundation said: “The combined effect of measures to boost the economy on low earners needs greater scrutiny. Further measures are likely to be needed to prevent low earners feeling the brunt of the recession. The Foundation has been working to improve outcomes for low earners since 2005. We will publishing a low earners audit in the New Year, which will illuminate the challenges faced by a group often overlooked.” /Ends For further information please contact Cara Brown on 020 7731 9143 / 07813 302801 cara.brown@resolutionfoundation.org or Caroline Merrell at Temple Bar Advisory on 020 7002 1080. All the Foundation’s research, reports, briefings, seminar notes are available on our website www.resolutionfoundation.org Notes to editor: The Foundation defines ‘low earners’ as those with below-median income (from all sources) who are (more or less) independent of state support. As a proxy, a household is considered low earning if gross annual income is between £11,200 and £25,800. Around 7.4 million households in the UK fall into this category, equivalent to around 15.1 million adults, or just under one-third of the adult population. Households with above-median incomes are considered high earners, while those with below £11,200 income are considered benefit-dependent. The Foundation’s first project in 2005 was on low earners and their financial health. Discovering an ‘advice gap’ for 12 million low earners of working age and a further 3 million low earners in retirement, the Foundation developed proposals for a national generic financial advice service. This proposed service was aimed at low earners in the ‘advice gap’ – people who are not currently attractive to commercial providers of advice, nor receiving support from existing voluntary sector provision. This work fed into the Thoresen Review which recommended in March this year that a Money Guidance service be set up. This is now at Pathfinder stage backed by £12 million from the Treasury and the FSA. Relevant Resolution Foundation reports can be downloaded from the Foundation’s website: www.resolutionfoundation.org- A national dividend: The economic impact of financial advice and The advice gain: The impact of generic financial advice on the financial services industry.
