When advice is not enough — the rise of negative budgets: a blog from Citizens Advice.

Something is going wrong. Increasingly our advice is no longer enough to get people back on their feet.

So we’re releasing the first in a series of landmark reports looking at the phenomenon of negative budgets. This technical sounding term represents a stark reality — people who, despite expert advice, do not have enough money to cover their essential bills.

It shows a country with millions living on empty, people struggling in a much more profound and ongoing way than what might be dismissed as recent temporary crises.

This report aims to start a conversation about a policy issue that will increasingly define the next decade and a tool or a lens that can be used by policy makers to understand what can be done.

The limits of advice

Helping people deal with their problems can be absolutely transformative. This is why Citizens Advice exists and 1000s of front-line advisers have done this job with expertise and care for more than 80 years. But for more and more people we’re reaching the limit of what advice alone can do.

Myself and colleagues meet regularly with advisers and leaders of local Citizens Advice and increasingly the story we hear is — advisers doing everything to help people, boosting their income, cutting costs and helping with debts. And how this used to be enough to help people back on their feet, but too often that’s no longer true. It’s a painful thing for advisers to say, that without a boost to income or a cut in essential costs, there’s nothing more we can do.

We started off a little sceptical about whether anything had really changed.

Firstly, our advice still clearly makes a huge difference to people’s lives — I know this from the regular sight I have of our impact data.

And secondly, people have always struggled to get by. Advisers have always felt an acute sense of frustration from seeing the same kinds of people with the same problems day after day — it does that to you. In my role you see that through emails and forms from advisers saying ‘I’ve helped someone with issue X five times today, can’t something be done?’

So we delved into our data to find out more.

The rise of negative budgets

Something fundamental has changed. That story we hear from local offices is right there in the data. A rapid rise in people whose income doesn’t meet their essential costs — technically known as a ‘negative budget’.

Understanding the technical definition of a negative budget is key. Someone is deemed to be in a negative budget based on a rigorous assessment with a debt adviser where income is maximised and costs are cut back externally validated levels. It’s not about what they want to spend, but what they need to spend on the bare essentials.

We’ve done this with over 250,000 people in the last 4 years alone and the results are grim. In 2019, just over a third of our debt clients were in a negative budget. Today it’s over half and the number goes up pretty much every quarter.

What this is showing is millions of people living on empty. Huge numbers doing all the right things but still ending up short at the end of the month. It also shows millions more questioning why they have so little left once the bills have been paid — nowhere near enough to build an adequate buffer or to afford much more than the bare essentials. And this is not just those people might (rightly or wrongly) expect — this is people in work, people on reasonable incomes and homeowners.

A recent or long-standing phenomenon?

Our data focuses on recent history, but I’m sure many will be placing this in the context of long-standing debates about declining living standards. Others have written on and researched this extensively and I won’t recap here.

But as everyone is prone to do, I sometimes think about this through my own life. Looking at a significant period of my upbringing purely through an advice lens, things were pretty comfortable. We were a single parent household near Newcastle, with two kids. Income was steady — one part-time mid-level local authority salary (to balance around childcare) with some child maintenance and basic state support (child benefit etc). Expenditure was fine — nothing particularly extravagant but the basics were all there with enough left over for the occasional holiday and other things that take someone beyond just surviving. A Citizens Advice adviser would look at it and have no cause for concern.

The reason for sharing this has nothing to do with a ‘things were tough’, or even a ‘people used to just get on with it’ narrative. It’s the opposite. What surprises me is how comfortable we were. The maths — the income and expenditure — didn’t just add up, it left us with surplus, meaning we could put money away for a rainy day.

Now, reading too much into individual examples (particularly my rose-tinted childhood musings) is dangerous. But this story — to me at least — just feels so much less likely today. Met with the same story today, one of our advisers might not be waving us happily out of the door with everything in balance.

More than a policy challenge

Over the last couple of years, negative budgets have started to form part of the story we tell about our clients. But increasingly we are using it as a diagnostic and analytical tool for our own work. Who is struggling most and falling below the line? Where should we target and push government for interventions to turn the dial?

Publishing this initial research today is about sharing with others who are trying to do similar things, those making and those trying to influence policy. Partly it’s about sharing the challenge — we think this is a generational problem that will define the priorities of any government for at least the next decade. If we don’t respond to it, the only logical result is a timebomb of debt as people find it impossible to make ends meet.

But it’s more than just a policy challenge — it’s also a tool or lens that can be used to frame our collective response to this challenge. It’s worth being clear that it’s never our intention to offer a whole systems solution to the problem of negative budgets. Put simply, we don’t think we are the right people to do that — it’s clearly much bigger than us and others already have superb ideas on what could be done to, say, push up wages.

Today we’ve given a couple of examples of interventions that could make a real difference — fixing benefit deductions and targeted support on energy bills. We hope others will put forward their ideas and are making it our mission to facilitate and enable this where it helps to do so.

So, what next?

The next step in this will be to scale up our analysis of our own clients to the population level so we can see the real prevalence of negative budgets. We expect these findings to be stark and we know people are clamouring to see them.

This should then give us a framework within which to tackle negative budgets — something we think should increasingly make its way to the top of the political priority list. In a bout of optimism which might run counter to the size of the challenge or the political mood, we genuinely think this can be solved. Every negative budget is essentially a failure of policy — when you look into the detail of individual budgets you can start to see a roadmap for interventions that will make a real difference, not all of which need big investment.

So, please do read our report which kicks this off. And if you think you have ideas or can help, we look forward to working with you!


This blog was written by, and appears by kind permission of, Matthew Upton, Director of Policy at Citizens Advice.