Millions ‘one bill from crisis’

Millions of people are one unexpectedly large bill from a huge personal financial crisis, a report has found.

The study by the Guardian Newspaper has claimed that there are seven million adults in work who could find themselves in deep trouble due to something as simple as an unexpectedly large fuel bill.

According to the paper, this group – representing 3.6 million households – have little or nothing in the way of savings or equity in the home to fall back on.

This had led to suggestions that the view championed by the main political parties that getting into work is the best way out of poverty can be questioned.

Labour MP Frank Field, who is the coalition's poverty tsar, said: "These figures are a mega-indictment on the mantra of both political parties, that work is the route out of poverty."

He added: "Recent welfare cuts and policy changes make it difficult to advise these people where they should turn to get out of it: it really is genuinely shocking."

Another notion that may be challenged by the study is that the problem is mainly confined to the north or the inner cities, with the English Riviera hit worst as people in Torquay, Paington and Brixham tend to be most at risk.

One danger is that proud, self-reliant workers who get into trouble will try to tackle it through emergency borrowing measures such as taking out high-interest payday loans.

However, such an approach carries major risks, both through the initial high interest and the extra costs that come with failing to clear the amount by the next payday and having it rolled over.

The increasing difficulty faced by many consumers may be attributed to the ongoing squeeze in incomes over recent years, with the Institute for Fiscal Studies revealing the typical family has got seven per cent worse off between 2007-08 and 2010-11.

By James Francis