A third of households were spending more than their income even before Covid struck – amid fears the looming cost-of-living squeeze could be ‘fatal’ for some.
Analysis has found 35 per cent were living beyond their means up to March 2020, and barely half had a financial buffer that would cover their excess outgoing for a year.
Some 57 per cent of working age people living alone spent more than their income in the previous two-year period.
The grim picture, collated by the Office for National Statistics, emerged with alarm that the UK is heading for a brutal crunch as prices soar and taxes rise.
Economists have warned that families are set to be £2,500 worse off this year as the world reels from the standoff over Ukraine. Ministers have raised concerns it will be like the oil shock in the 1970s, which drove inflation and interest rates to eye-watering levels.
Food writer and campaigner Jack Monroe told MPs today that the impact on the ‘millions of children living in poverty in Britain today’ is ‘going to be, in some cases, fatal’.
Highlighting the spending habits from 2018-2020, the ONS report said ‘some households may be able to maintain higher levels of spending by drawing upon a financial buffer accumulated over their lifetime’.
But it cautioned that ‘others may need to make cutbacks, or borrow, to make up the shortfall’.
Working age people who were living alone and had a shortfall had funds to cover it for just three to four months on average.
Single parent households were less likely to be overspending – at 43 per cent – but those that were could only sustain the level for an average of a month.
Households in the North East were among the most likely to be overspending, and had an average buffer of seven months.
The proportion living beyond their means in the South East was 43 per cent, but had more in the bank – enough to maintain the spending for more than two years.
The Centre for Economics and Business Research has predicted that living standards will fall by a record 4.8 per cent this year.
That would be equivalent to £71billion off disposable incomes, or £2,553 per household. And spending power could fall by another £1,043 per family next year.
The grim estimates came as Michael Gove highlighted the ‘direct historical comparison’ between the current Ukraine crisis and the fallout from the Yom Kippur war in 1973.
That saw oil prices nearly quadruple when Arab nations imposed an embargo in protest at the West’s support for Israel.
In the ensuing chaos UK CPI inflation reached just under 23 per cent in 1975, while by 1979 interest rates had spiralled to 17 per cent.
Boris Johnson today declared a coordinate bid across the West to wean itself off Russian oil and gas supplies.