A charity is warning that a living standards catastrophe is becoming the new normal ahead of the general election, as research reveals that five million people are in a negative budget.

Citizens Advice’s new analysis shows that the number of people in the red has jumped from 3.25 million since the start of 2020 – more than 50% in just four years. Currently, that includes 1.5 million children living in a household that has more money going out than coming in.

Housing and energy costs are swallowing up people’s income, pushing many into the red. Private renters in a negative budget are spending nearly three-quarters (73%) of their income on these two costs alone, leaving little for other essentials. While mortgage holders in the same situation are spending 43% of their income on energy and mortgage costs combined.

Without government action, Citizens Advice predicts over 250 people will fall into a negative budget every day in the run up to the election.

The charity says it is seeing more people in full-time work and people with mortgages finding themselves living on empty, cutting back spending to under the bare minimum and going without vital food or heating to stay warm.

The charity’s latest research found that despite falling inflation, the cost of essentials remains stubbornly high with 2.35 million people cutting back on things like meals, energy and seeing friends and family.

For others, falling behind has been unavoidable. In particular, pensioners privately renting are more than three times more likely to be in a negative budget than pensioners generally.

Alison* is a widow in her early sixties who lives alone. She has a permanent brain injury which causes health issues that limit what she can physically do.

Before her illness, Alison ran her own cleaning business. Now she is unable to work and receives universal credit and Personal Independence Payment. For several years, she received the additional limited capability for work element of universal credit – for people unable to work due to their health – and was in a positive budget.

However, last year, her claim was reassessed and she was deemed fit to work. As a result, her monthly income was reduced by around £400. She has appealed the recent decision but while waiting for the tribunal outcome, she cannot make ends meet.

“Since my limited capability for work element was taken away, I’m getting £400 a month less, roughly. Now I’m living on a shoestring.

“I don’t buy clothes, I have not got the money. I’ve only got £40 to last me for the next 12 days.

“As soon as you get any money in the bank, you go food shopping and it’s gone. It goes so quick.I have to shop very carefully and I don’t go out.”

With a general election on the horizon, four in five (79%) voters say negative budgets are an important issue. But Citizens Advice is warning that politicians are failing to address the root cause of people’s costs far exceeding their income, while resorting to short-term handouts.

The charity’s new research shows that cost-efficient policy changes can be made immediately to turn the tide on living standards. Citizens Advice is proposing a package of support that could lift 1.1 million people out of a negative budget right away. This includes uprating benefits using the Household Cost Indices – a measure that more accurately reflects the rate of inflation for low-income households – as well as improving energy bill support and reforming Local Housing Allowance.

But to ensure living standards are improved in the long-term and at scale, more must be done to deal with stagnant incomes and tackling spiralling costs – crucially the cost of housing.

Dame Clare Moriarty, Chief Executive of Citizens Advice, said: “A negative budget is the difference between making ends meet and being pushed deeper and deeper into trouble.

“Getting people out of the red and into the black is what our advisers specialise in. But they can’t tackle a challenge of this scale alone.

“For too long politicians have papered over the cracks, allowing a chasm to grow underneath as living standards drop even further.

“Now is the time for bold action to give sustained security to the millions of people living on empty. Policymakers can’t continue to bury their heads in the sand.”