by Rory Mair CBE, Chair of CAS.
This column was first published in the Herald on 6 October 2021.
Today Universal Credit will be reduced by £20 per week, leaving around half a million people in Scotland facing a drop of around £1000 per year in their incomes.
Boosting the payment at the beginning of the pandemic was the right thing to do. Removing it now will leave people facing a financial cliff edge. Indeed, this reduction will mean Universal Credit is worth less than when it was first introduced in 2013. According to the Joseph Rowntree Foundation it will be the biggest fall in social security since the introduction of the modern welfare state.
This comes as people across Scotland face huge challenges – a ‘perfect storm’ – financially, as the furlough scheme ends, energy bills rise and with inflation at record levels.
On Friday energy bills went up for millions of people across the UK as the energy price cap was lifted. Those on default tariffs paying by direct debit will see an increase of around £139. Prepayment customers will see an increase of around £153.
The price cap, while not perfect, has ensured a degree of protection for consumers. Unfortunately the ongoing crisis in the energy market could see people facing even higher bills.
As the global wholesale price of gas has increased, multiple suppliers have gone out of business. Rules are in place to protect peoples’ supply of energy, with the regulator Ofgem appointing a supplier of last resort for people whose provider has gone out of business.
There is a risk, however, that people who are moved onto a new supplier will face higher bills. Citizens Advice Scotland has made the case that no one should miss out on the Warm Home Discount scheme if they are moved to a new supplier.
This discount – around £140 off energy bills for those on low incomes – is an absolute lifeline for vulnerable people. Being knocked off it through being moved to a new supplier would be a huge problem for them.
All of this points towards an incredibly challenging winter for many families across Scotland. But the truth is that lots of people were already struggling over the course of the pandemic, even with the added protections of Universal Credit, furlough and the energy price cap.
Analysis by CAS reveals that 1.4 million people ran out of money before pay day at least once during the pandemic. By pay day we don’t just mean wages, but payment day for pensions and other social security benefits. That’s around a third of Scotland’s adult population.
What this means is that people face impossible choices in their spending. Almost 300,000 people missed a rent or mortgage payment at least once because they had run out of money – it’s hard to think of a more essential bill than the roof over your head but hundreds of thousands of our neighbours at least once simply could not afford it last year.
Likewise, the cliché of ‘heating or eating’ has become a regular, and grim, subject when policy-makers and researchers discuss energy costs and income issues in Scotland. Almost 400,000 people missed a gas or electricity payment over the last year because they had ran out of money.
These figures are staggering. They are scarcely believable, and yet all the evidence suggests the coming weeks and months will see things get even worse. The problems we have seen in the energy market didn’t impact upon the price cap increase we saw last Friday. In all likelihood the next time the cap is adjusted, in the spring of 2022, consumers will see another record rise.
This perfect storm of financial challenges for consumers is something the Citizens Advice network has been wary of for months. It’s why in recent weeks we have launched ‘Our Advice Adds Up’, a campaign to encourage people to get advice if they are worried about money.
You can get advice from our network in a way that suits you. Either from your local CAB, our Advice for Scotland website, or www.moneymap.scot, an online tool which rounds up your options to increase your income and cut your cost of living.
It’s easy, when faced with a barrage of headlines and statistics like the ones I have outlined in this column, to be cynical about the levels of support available. Frequently people don’t seek advice because they think help isn’t available to them. Yet when we researched our clients views we saw that more than half (51%) of people who sought debt advice from a Citizens Advice Bureau wish they had done so sooner, and the equivalent figure for people seeking all types of advice was four in ten.
As much as 80% said that the advice they had received had relieved their stress, and 94% reported that it made them realise they were not alone.
With money worries piling up, it’s important to understand that around 56% of the advice the Citizens Advice network gave last year helped people maximise their incomes. In fact, we unlocked a total of £147 million for people, helping 171,000 clients overall during the pandemic. Quite literally, our advice adds up.
We’ll continue to do our bit, as we have for over 80 years, helping people through a series of national challenges. After the global financial crisis in 2008 for example we unlocked £1.3 billion for Scottish people in the decade that followed.
What would allow us to do even more is decisions from policy-makers that truly put income maximisation and the cost of living at the heart of the Covid recovery agenda. ‘Build Back Better’ has been a popular slogan during the pandemic regarding what comes next. It needs to move from a slogan to reality.