Unsung Britain
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Household debt
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Wealth & assets

Money on my mind

Understanding the savings, debt and financial resilience of low-to-middle income families

Felicia Odamtten
Felicia Odamtten
Simon Pittaway
Simon Pittaway

This paper is part of our Unsung Britain project, which explores the everyday economic reality for low- to middle-income families. It shifts the focus beyond income, looking instead at the savings, debts, and arrears that shape households’ ability to weather financial shocks.

We show that while some households are managing to save more and carry less debt, many remain just one setback away from difficulty. Savings levels are worryingly low, arrears have grown sharply – particularly on essentials like energy and council tax – and while debts have fallen, this largely reflects tougher credit conditions rather than greater security.

The research shows why policymakers must look beyond headline income figures to address financial resilience, with action needed to boost savings, expand affordable credit, and reduce exposure to arrears.

Key findings

  • British households are carrying far lower levels of consumer debt than in the past. Among the poorer half of families, average debt has fallen from £2,617 in 2006-08 to £2,256 in 2020-22 – a 14 per cent real-terms drop. Higher-income households have seen an even larger fall of 21 per cent over the same period.
  • Over two-in-five poorer households still have less than £1,000 in liquid savings, leaving them exposed to even modest financial shocks. But saving behaviour has picked up: a third of poorer households (33 per cent) reported having money left to save in 2018-20, compared with just a fifth (20 per cent) in 2006-08.
  • But while levels of consumer debt have fallen, other problem debts, like falling behind on ‘priority’ household bills have risen. Council Tax arrears in England have risen from £4.6 billion in 2019-20 to £6.7 billion in 2024-25, an increase of almost half in just five years. Nearly one-in-five of the poorest families (18 per cent) are now behind on at least one priority bill.
  • The number of energy customers in arrears has more than tripled since 2012, reaching over 1 million electricity accounts and 0.9 million gas accounts. The average energy debt has surged from under £500 to about £1,500 – a 51% rise in just over a year.
  • Arrears are also creeping up the income distribution: around one-in-ten middle-income households are now behind on a priority bill, compared with fewer than one-in-twenty a decade ago.

Recommendations

  • Boost savings by expanding Help to Save through auto-enrolment, introducing sidecar savings alongside pensions, and using targeted incentives to help low-income families build accessible rainy-day funds.
  • Expand fair access to credit by ensuring low-income households are not locked out of affordable borrowing and have alternatives to high-cost credit.
  • Improve financial education by providing timely advice and tools that help people understand loans, debt, and arrears at the point when they need to make financial decisions.
  • Tackle high essential costs head-on by strengthening Council Tax support for poorer households and introducing targeted social tariffs on energy bills.
  • Relieve the stock of priority debts by investing in early-intervention support and introducing capped debt relief schemes for energy arrears among families on means-tested benefits.

Further reading

Money on my mind
Understanding the savings, debt and financial resilience of low-to-middle income families
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Felicia Odamtten, Simon Pittaway
Don’t forget about us
How disabilities and caring responsibilities affect low-to-middle income Britain
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Hannah Slaughter, Imogen Stone
The bare necessities
Unpacking the rising cost of essentials for low-to-middle income Britain
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Simon Pittaway, Lalitha Try

https://doi.org/10.63492/XSA802

Felicia Odamtten
Felicia Odamtten Economist
Simon Pittaway
Simon Pittaway Senior Economist