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Deficit budgets: The cost to stay alive

Man looking in the food cupboard and grabbing a can of food
Our latest briefing paper, ​‘Deficit budgets: The cost to stay alive’ explores the severe consequences of deficit budgets in households across the UK and pushes for urgent systemic change. 

Read ​‘Deficit budgets: The cost to stay alive’

Read the full briefing paper

Read the summary report

Read the summary

In today’s challenging economic climate, more and more UK households are struggling to make ends meet. The reality of deficit budgets – where income falls short of covering essential living costs – is a growing crisis that affects millions of people across the UK.

Our latest briefing paper, Deficit budgets: The cost to stay alive, sheds light on the severity of this issue, its impact on vulnerable communities, and the urgent need for systemic change.

What is a deficit budget?

A deficit budget happens when a household’s income (whether from wages or benefits) isn’t enough to cover essential living costs, such as rent, utility bills, food and clothing.

Almost half (47%) of those who seek help from CAP have a deficit budget, and would need, on average, an additional £273 per month in income to make their budget balance.

Watch the video below to learn more.

11.8 million (22%) of UK adults say they currently have a deficit budget.
So what is a deficit budget?
It’s when a person’s income doesn’t cover the cost of basic essentials they need to live on.
This means people often face impossible options, such as either buying food or heating their home.
This has a detrimental effect on people’s mental and physical health.
Poverty is a matter of urgency.
Join the fight against poverty.

Key findings

  • 22% of UK adults report living on a deficit budget, unable to cover essential bills and costs with their income.
  • 47% of CAP’s clients have a deficit budget, requiring £273 more per month on average to make their budget balance.
  • Personal impact: Deficit budgets significantly affect mental and physical wellbeing, contributing to severe stress and worsening existing health conditions.
  • Societal inequality: The rise in deficit budgets is deepening social inequality, disproportionately affecting those on low incomes.
  • Coping mechanisms: In order to simply survive, many are forced to skip meals, limit gas and electricity use, and rely on informal borrowing or selling possessions.
  • Policy recommendations: The report recommends urgent systemic changes, including a Minimum Income Standard, better social security, and protections relating to housing and energy costs.

Deficit budgets are not just a statistic – they represent real families, individuals and communities who are forced to make impossible choices every day. According to our findings, a staggering 22% of UK adults are living on a deficit budget, meaning they can’t afford to cover basic needs like food, housing and energy. This financial shortfall is driving more people into poverty, exacerbating health issues, and widening the gap of inequality in our society.

The stress of living on a deficit budget takes a significant toll on mental and physical health. People are skipping meals, going without essential utilities, and facing the crushing pressure of not knowing how they’ll make it through the month. This constant strain not only worsens existing health conditions but also leads to new ones, creating a vicious cycle that’s hard to break.

Deficit budgets are about more than money – they’re about fairness and equality. The burden of financial shortfalls disproportionately affects those with the least, deepening social divides and perpetuating cycles of poverty. As the cost of living continues to rise, those at the bottom are left further behind, with limited access to the opportunities and resources needed to improve their situation.

As a result of inadequate incomes, many households are resorting to desperate measures just to survive. From skipping meals to reducing energy use, these coping mechanisms are unsustainable and harmful in the long term. Being forced to rely on the goodwill of others and services such as food banks has become a lifeline for many, yet this isn’t a sustainable solution.

Inadequate incomes can cause people to: 

  • Use credit
  • Borrow from friends and family
  • Use charity support, e.g. foodbanks

An increase of the cost of essentials can cause people to: 

  • Juggle debt
  • Go without essentials 
  • Sell their possessions

Policy recommendations

This briefing paper outlines clear, practical recommendations to address the crisis of deficit budgets. We advocate for a Minimum Income Standard, robust social security, and targeted support for essentials like housing and energy. These changes are not just necessary – they’re urgent. By addressing the root causes of deficit budgets, we can create a fairer society where everyone has the opportunity to thrive and live with dignity.

Social security should provide an income safety net for people, preventing anyone from falling into a deficit budget trap.

To achieve this, the UK Government should:

  • Establish a protected minimum amount of social security, an Essentials Guarantee, so that the basic rate of social security always covers life’s essentials, and ensure support is never pulled below that level.
  • Recognise the current gaps in income and consider the value of the Minimum Income Standard (MIS) as a strategy for tackling poverty in the UK.
  • Continue to focus on making sure incomes remain in line with the real costs of living.
  • Review the social security system to make sure it provides support and doesn’t cause harm.

Employers should:

  • Ensure wages are sufficient to prevent any worker from facing a deficit budget.

Everyone should receive the support they are entitled to. To ensure this, the Department of Work and Pensions should:

  • Develop a strategy to guarantee that every individual and household across the UK receives the social security they are entitled to.
  • Consider auto-enrolment in Universal Credit to guarantee income maximisation, reduce the personal burden of social security applications, and ensure everyone has a protected income floor.

Essentials and energy costs: Costs should not lead to people going without the essentials.

We’re calling for the UK Government to:

  • Support community-based initiatives designed to pool and share resources, such as social supermarkets, food pantries, fuel bank vouchers, and item libraries.
  • Recognise and address the poverty premium affecting access to essential services, giving regulators the power to make sure they’re tackling the differences in cost faced by those in poverty.
  • Implement long-term, targeted support in the energy sector to ensure everyone can afford to keep warm and safe.
  • Create a dedicated ​‘Help to Repay’ scheme to support individuals struggling with energy arrears. This scheme should offer repayment matching to help people get out of debt sooner or provide full debt relief based on their level of need.
  • Safe and affordable housing: Everyone deserves a safe and affordable home.

To achieve a more equitable housing market, we recommend that the UK Government:

  • Increase the rights and protections for tenants in rented accommodation to provide stability and a safe home for all.
  • Ensure the levels of social housing meet demand.

To ensure everyone can access support for debt advice when needed:

  • The UK Government should provide more sustainable and sufficient funding streams to ensure FCA-authorised free debt advice is available and accessible for people facing debt.
  • The Money and Pensions Service (MaPS) should launch a strategic effort, working with the UK Government and businesses, to ensure people are aware of the free and non-judgemental support available.

With regards to legislation and regulation, the UK Government and regulators should:

  • Ensure that any new legislation or regulation does not cause additional harm to people surviving on deficit budgets.
  • Increase regulation of credit marketing and advertising, providing safeguards on language, location of advertisements and customer profiling.
  • Develop regulatory requirements that hold firms accountable for protecting customers by offering support, and reporting data to the Money and Pensions Service (MaPS) when customers use credit to pay for essentials.

With regards to policies and processes, creditors (including the UK Government and local authorities) should:

  • Put in place clear policies and processes to make sure customers with a deficit budget receive support to make sure they’re receiving all the income they’re entitled to, and access to additional help.

For a more in-depth look at the UK’s current deficit budget crisis and our proposed solutions, download the full briefing paper:

Download the briefing paper 

The impact of deficit budgets on CAP’s clients

Senior Debt Advisor Ali shares how a huge amount of CAP’s clients are struggling, and gives insight into the tough choices that people are having to make to survive. 

Watch the video below to learn more.

Income levels, whether it’s work or social security, have not risen in line with the cost of living increases. A huge amount of our clients are struggling at the moment with something we call a deficit budget, where the income is just too low, no matter what somebody does to be able to afford their essential living expenses, they’re having to make the choice between, can they afford their rent or their bills, can they heat their home? Can they pay for their food or travel? Because all expenses have increased.

This is affecting people very negatively with their mental health, with their physical health, with their absolute general wellbeing. And it’s really actually heartbreaking to see people that it’s of no fault of their own, that the system means that their benefits or their income is not enough to afford to live.

Senior Debt Advisor Jim shares the need for politicians to get involved with the issue of poverty, as more people are slipping through the net due to the increase of wealth inequality. 

Watch the video below to learn more. 

I think politicians really need to engage with the issue of poverty. The fact is that, over the last decade or so, wealth inequality has increased, and a lot of people are slipping through the net. 

When I started as a debt advisor back in 2011, it was really rare for someone who was working to have a budget that we couldn’t balance. And now it’s commonplace. I think more than half the budgets we look at now are what we call deficit budgets. By the time they’ve paid their rent, their energy, their council tax, their other bills. It’s just impossible to product a budget where they have enough money to live and have a decent standard of living. 

It can just be a downward spiral as their anxiety increases, their stress levels increase, their ability to cope just goes away and there are times where you just get off the phone and it just feels, you would love to be able to do more, but the situation itself is just so tough.

People in the lower half of salaries, are struggling more and more. So reform there would be good, but perhaps closer to home, just making sure that there is good debt advice, and benefits advice, and budgeting advice available to people who need it.

Find more research and insights: 

Blog: Deficit budgets and the transformational impact of local churches

Find out more 

Blog: Five ways to cope when you’re living on a deficit budget

Find out more