BRITAIN’S poorest families are bearing the brunt of the coronavirus crisis, and have been left £170 a month worse off on average.
At the same time, better-off households have built up savings faster than normal as they’ve spent less during lockdown, according to research.
The coronavirus pandemic has left poorer families £170 a month worse off on average
On average, the lowest-earning 20% of households have seen their bank balances shrink by £174 a month between March and September, compared to their finances in 2019.
It means their bank balances have fallen by roughly £1,220 in seven months, compared to what would’ve been expected in a normal year.
The dive in earnings is equivalent to about 14% of their pre-Covid incomes, according to research by the Institute for Fiscal Studies (IFS).
Meanwhile, the top-earning households have added an extra £364 a month to their bank balances.
This is due to a combination of stable incomes and reduced costs, meaning they have been able to save more than usual.
The IFS found that “forced saving” – declines in spending on goods and services shut down by lockdown – has been greater among high-income households.
The highest-earning 20% of households have reduced their spending on such goods by £195 per month, compared with £75 for the poorest fifth.
The poorest households tend to spend bigger percentages of their income on essentials and so often have less room to cut back.
The IFS research, funded by the Standard Life Foundation, used bank account data from budgeting app Money Dashboard.
Tom Waters, a senior research economist at IFS and an author of the report, said: “The inability to spend in many shut-down sectors of the economy has led to reduced spending across the income distribution.
“However, spending falls have been higher among higher income groups, and more than outweigh falls in income, with the opposite true for the poor.
“This means, on average, richer households have accumulated savings faster than normal, whereas poorer households have run them down or accumulated debts.”
Mubin Haq, chief executive of Standard Life Foundation, added: “Increasingly the pandemic is exacerbating existing inequalities.
“The poorest were the least able to cut back on spending, as much of their expenditure is on daily essentials.
“Coupled with income falls, they saw their bank balances reduce by nearly £200 a month, whilst those on higher incomes saw increases of nearly £400 a month.
“Finances for those on the lowest incomes are likely to deteriorate further, especially if the government does not extend the £20 a week uplift to Universal Credit beyond March next year.”
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