After coining the phrase Ã¢â‚¬Ëœjust about managingÃ¢â‚¬â„¢ (JAMs) to describe struggling British households, the Prime Minister brought into a focus a slightly nebulous group of the population. Mike OÃ¢â‚¬â„¢Connor, chief executive of StepChange Debt Charity, believes itÃ¢â‚¬â„¢s less about definition, and more about precaution
On entering Downing Street, Prime Minister Theresa May took a moment to address those she described as “just managing”, saying: “I know you’re working around the clock, I know you’re doing your best, and I know that sometimes life can be a struggle.”
She said that her government will be driven “not by the interests of the privileged few, but by yours.” The acronym – the ‘just about managing’ or JAMs – has entered our lexicon, for the time being at least.
No one seems to have quite nailed down who this group of people are. The Resolution Foundation, a think tank that publishes research on living standards, estimates that they are a group of around six million households spread across the UK. It estimates that JAMs are generally on low to middle incomes and live in homes where one person is in work and the majority of income comes from employment but is often topped-up by benefits.
Regardless of how you define this group, the phenomenon is all too familiar to us. More than 80 percent of our clients have incomes below £30,000 – an average of £16,650 – and, after accounting for all their essential household bills, only have £58 left towards repaying debts. This means most of our clients fall into the group of people whose interests the PM said would drive her government.
The inevitable consequence for people ‘just about managing’ is that, given life’s ups and downs, a significant number will stop being able to manage and fall into difficulty. Even a small income or cost shock can tip people just about managing into not being able to cope. Our advisers see this every day, where the loss of a job, illness, or a reduction in hours leaves people in a position where they can no longer just manage. All too often credit becomes the false safety net on which they rely.
The Bank of England recently highlighted these risks when it reported that household debt-to-income ratio is high by historical standards. It issued a clear warning that these households are “particularly vulnerable to shocks such as falls in incomes or increases in interest rates.”
New labour, new liability
Structural changes in employment patterns may bring advantages in terms of a flexible labour market – such as the growth of zero hours contracts, under-employment and self-employment. But coupled with cuts to welfare, these changes mean that people are increasingly vulnerable to such shocks and falls in income. When people hit hard times, there is no responsive safety net to prevent a slide into problem debt.
Despite the extensive coverage given to the government’s plans to support the just about managing group, the Autumn Statement didn’t deliver any real respite. Even with the previously announced changes to the income tax threshold and National Living wage, with inflation predicted to hit 2.7 percent by this time next year, our clients are likely to be £16 worse off each month.
For those on benefits, this rises to £23. Think of that in the context of having just £58 left at the end of the month. Far from helping those in need, this will make life for those just about managing even more difficult.
Next year may prove to be a bumpy ride for many households. Debt purchaser Arrow Global’s latest research predicts that households in default could rise by 17 percent by 2020, from four million to 4.7 million, while a PwC report suggested that a two percent rise in interest rates could leave households needing to find an extra £1,000 per year to service their unsecured debts. The impact for those with mortgage debt will be far more severe.
However it’s defined and whatever acronym is used, it’s clear that the government has identified a group of people it wants to be seen to be better supporting.
To do that, improving the financial resilience of households through supporting precautionary savings, ensuring that people have better access to affordable credit and delivering better support when people do fall into difficulty will all be essential.