Income, spending and wealth: how do you compare?

One in three households were spending more than their income before the coronavirus (COVID-19) pandemic, new analysis reveals.

With household budgets being squeezed by sharp rises in the cost of living, joined-up data from the Wealth and Assets Survey (WAS) and the Living Costs and Food Survey (LCF) provide insight into the financial vulnerability of different households.

In the period from April 2018 to March 2020, an estimated 1 in 14 households were in poverty for income, spending and financial wealth.

Financial wealth includes cash (money in current accounts), savings, and other assets that are easy to access such as shares. It excludes property, private pensions and household belongings. Full definitions of poverty are available in Measuring the data.

When you think about your income, spending, savings, and any property you own, do you consider yourself richer or poorer than average?

Our calculator compares your financial situation with other households.

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Before coronavirus, one in three households were spending more than their income

More than a third (35%) of households in Great Britain spent more than they had in disposable (net) income before the coronavirus pandemic.

This is according to linked data from the WAS and the LCF for the period April 2018 to March 2020.

Increasing household costs such as energy tend to have a disproportionate impact on lower income households and their spending. Those who are already spending more than their income may be less able to absorb additional costs.

While some households may be able to maintain higher levels of spending by drawing on a financial buffer accumulated over their lifetime, others have less to fall back on and may need to make cutbacks, or borrow, to make up the shortfall.

Of households that were spending more than their income before coronavirus, nearly half (46%) had a financial buffer that would cover their overspend for less than a year.

A financial buffer is made up of a household’s liquid assets, which include cash (money in current accounts), savings, and other easily accessible assets such as shares. It does not include property or pension wealth.

Smaller households were the most likely to be spending more than their income. However, retired people living alone were able to sustain their overspend with their financial buffer for far longer than those not retired.

More than half (57%) of working-age people who were living alone spent more than their income in April 2018 to March 2020. This was the highest percentage among household types. These households were able to fund the shortfall for three to four months on average.

Single-parent households who were overspending (43%) could only sustain it for one month on average.

Retirees who spent more than their income had a much greater buffer to fall back on. A retired person living alone could sustain an overspend for an average of three years, compared with nearly seven years for a retired couple.

Households’ average levels of overspend are available in Table 4 of the accompanying dataset.

Households in the North East were most vulnerable to their budgets being squeezed. They were among the most likely to be overspending (39%), with a financial buffer that would last only seven months on average.

While households in the South East (43%) and the South West (40%) were the most likely to be spending more than their income, average financial buffers in both English regions were sufficient to fund this overspend for more than two years.

In London, households were less likely than average to be overspending (31%), but those that were could only sustain it for eight to nine months on average.

Around 2 million British households (7%) were in poverty for income, spending and financial wealth before the coronavirus pandemic (April 2018 to March 2020).

Of the three measures, households were most commonly in financial wealth poverty (42%).

A household is considered to be in income poverty when their disposable income is less than 60% of the national average for similar households. Likewise, they are in spending poverty if their expenditure is less than 60% of the average.

A household is in financial wealth poverty if, in the event of losing all their income (including government support), they have insufficient liquid assets to provide a level of income equal to or above the income poverty line for three months.

1 in 14 households were in all three types of poverty

Percentage and approximate number of households in poverty for income, spending and financial wealth, Great Britain, April 2018 to March 2020

Data for households in income, spending and financial wealth poverty (XLSX, 18KB)

Poverty rates varied in different types of households.

Lone-parent households were worst off. They had the highest rates of income, spending and financial wealth poverty (54%, 46% and 83% respectively), with almost a third (31%) in poverty for all three measures.

Households with two parents were the next most likely to be in all three types of poverty (13%), while only 4% of households without children were in the same position.

People of working age who were living alone were the least likely to be in poverty for all three measures (2%), despite being among the most likely to experience income and financial wealth poverty (33% and 53% respectively).

Rates of spending poverty were the lowest among working-age people living alone (4%) compared with other household types.

Parents reported the highest rates of poverty before the coronavirus pandemic

Percentage of households in poverty for income, spending and financial wealth, by household composition, Great Britain, April 2018 to March 2020

Data for poverty rates by household type (XLSX, 18KB)

The northern regions of England had the highest rates of financial wealth poverty in Great Britain, with 51% of households affected in the North East and 48% in the North West.

The South East of England had the lowest rate of financial wealth poverty (33%).

Latest data on total household wealth (net property, private pensions, net financial wealth and household belongings) highlight growing disparity between regions.

Average total wealth in the North East (£168,500) was about one-third of the South East (£503,400) in April 2018 to March 2020.

The North East was one of the few regions where average wealth had fallen since 2006 (by 17% after adjusting for inflation), whereas the South East had seen growth of 43% over the same period.

The North East also had the highest levels of income poverty in April 2018 to March 2020 (29%), while households in London and the West Midlands were the most likely to be in spending poverty (22%).

Households in the West Midlands were the most likely to be in poverty for all three measures (11%), followed by London, Yorkshire and The Humber, and the North East (all 10%).

The West Midlands had the highest percentage of households in poverty for income, spending and financial wealth

Percentage of households in poverty for income, spending and financial wealth, regions and countries of Great Britain, April 2018 to March 2020

Data for poverty rates by region and country of Great Britain (XLSX, 18KB)

Measuring the data

The dataset used for this analysis was created by statistically matching data on household income and spending from the Living Costs and Food Survey (LCF) onto the Wealth and Assets Survey (WAS), which collects data on household income and wealth.

The LCF is a sample survey of private households in the UK, which is collected annually and currently covers approximately 5,000 households.

The WAS is collected once every two years, with the latest round of the survey including more than 17,000 households in Great Britain.

More information about the statistical matching process is available in a previous release.

Throughout this article, income, spending and wealth are all equivalised to account for the size and composition of different households. The only exception to this is levels of overspending, which refer to the amount by which non-equivalised spending exceeds non-equivalised disposable income.

Where we refer to total wealth, this is financial wealth plus wealth from property, private pensions and household belongings, minus liabilities.

There is no single agreed definition of poverty. In this article, poverty rates are calculated for disposable income (total income including benefits, minus taxes and housing costs), total spending, and financial wealth (cash or money in current accounts, savings, and other easy-to-access assets such as shares).

Households are described as being in income or spending poverty if their equivalised income or expenditure is below 60% of the respective national medians. For this analysis, households are described as being in financial wealth poverty if their liquid wealth position puts them at risk of financial insecurity, defined here as equivalised liquid financial assets below three months of the annual national relative income poverty line.

These types of relative measures are consistent with those used in the UK’s primary source of income poverty statistics, the Department for Work and Pensions’ Households below average income statistics, and indicators used by the Organisation for Economic Co-operation and Development (OECD).

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