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Posted on Tuesday, July 10, 2012 by Trust Deed Blogger
The Joseph Rowntree Foundation has released research in which it analyses the amount of income required in order to achieve a socially acceptable standard of living. This subject was first researched by the JRF in 2008, making the 2012 figures a fascinating comparison with the pre-downturn situation. At a time of increasing personal debt, and very high use of debt relief measures such as Scottish trust deeds or DAS, such research provides an insight into public expectations for lifestyle as well as the tough financial realities currently facing individuals and families.
The basis of the Joseph Rowntree Foundation survey is to establish what a “socially acceptable standard of living” is. This is achieved via focus groups discussing the issues of “needs” versus “wants”. The 2012 results show little change from 2008, suggesting that most of us have not significantly adjusted our lifestyle expectations downwards despite stagnant wages and increased costs.
The result is that a single person needs to earn a minimum of £16,400 before tax, a single parent with one child needs income of £23,900, and two parents with two children need £36,800. At and above these income levels people are considered to be in a position to achieve that socially acceptable living standard.
One major problem is that 25% of the population of the UK have income-levels below these thresholds. Another problem is that things have become progressively more difficult for families with children in particular. Their costs have increased by 16% more than their income, meaning many more now fall below the “socially acceptable” income level.
Not surprisingly, many people aren’t readily willing to live a lifestyle that would not be considered to be socially acceptable, and often this gap is plugged by the use of loans and other forms of credit. Where four years ago some people were wantonly spending their way through the economic boom, nowadays much credit is instead used just to pay for things that most of us believe should be taken for granted.
This appears to be the reason that people, especially families, are taking on more personal debt at a rapidly increasing rate. Following from that, we may be able to see why the number of protected trust deeds and bankruptcies in Scotland remains steadily high despite years during which banks have been less willing to lend and when we’ve collectively been less tempted to borrow to fund non-essentials.
It should also be remembered that the levels of income needed to achieve a socially acceptable lifestyle don’t make allowance for debt repayments. An individual or family with existing debts would need an income higher than that stated previously to live reasonably and service their debts concurrently. The cost of debt has typically increased since 2008, with credit card providers and banks upping their interest rates wherever possible (and we’ve witnessed the explosion of the high-cost credit market at the same time). Normal families with existing debts are therefore currently subject to extreme financial pressures.
There is much pressure on individuals and families to live a “socially acceptable” lifestyle at a time when many incomes simply aren’t keeping pace with the cost of achieving that goal. Many will cut back and live to their means, but others will believe they have little choice other than to borrow to manage what we generally now perceive to be essential expenditure. The end result is likely to be increasing debt for many, and a continued and extended need for debt relief in Scotland using measures like trust deeds, bankruptcy, or the debt arrangement scheme (DAS).Tags: joseph rowntree, jrf, socially acceptable standard of living