ii comment on latest ONS analysis of household incomes

The Office for National Statistics (ONS) has analysed households’ ability to cope with a sudden fall in employment income.

The Office for National Statistics (ONS) has today released analysis of households’ ability to cope with a sudden fall in employment income for a period of up to three months – a situation many have found themselves in during the Covid-19 pandemic.

Key points include:

• Households where the head – the individual who pays more than half of the cost of keeping up a home -  works in accommodation and food services, largely shut down since the end of March (67% of workforce furloughed), are least equipped to cope with a loss of income.
• Households where the head is employed in industries with lower rates of furloughing, such as IT and professional services, are more likely to be able to cover a drop in employment income.
• Considering employees only, 50% of lone parent households with dependent children would be unable to cover three months with 20% less employment income.

Myron Jobson, Personal Finance Campaigner, interactive investor, says: “The data underlines the importance of building a proverbial rainy day fund to plug any sudden fall in income for the short term and foot unexpected expenses such as the cost to repair a boiler – but it is easier said than done. Some of the lucky ones have become ‘accidental savers’, with commuting and eating out costs slashed – but these are tough times for huge swathes of society.

“Those on a low income could find themselves in a catch 22 situation. A cash buffer can be invaluable if something goes badly wrong, but at the same time debt commitments need keeping on top of.

“It’s a good idea to start a debt spreadsheet, prioritising those where failure to pay them off can hurt the most – for example, a mortgage, which is secured against your home – alongside utility bills and council tax.

“Card debt can be expensive, so it makes sense to pay off this debt as quickly as possible.

“You then need to work out how much money you have left over and there are lots of charities offering free help, too, such as Citizens Advice.

“For those who can afford to save, measly interest rates – exacerbated by further cuts in interest rates in March as part of measures to protect the economy against coronavirus - offer little incentive, but we all need cash savings.

“We are living in truly uncertain times and those who can afford to do so may endeavour to reinforce their rainy day pot with extra cash – having three months’ worth of salary stashed away is a good rule of thumb although many people would want to double that given the employment uncertainty amid Covid-19, if they are fortunate enough to be able to do so.”