More than 6.5 million households across Britain are in debt or face the prospect of falling into debt within a month should they lose their jobs or face a large financial shock, according to analysis from a charity.
The Equality Trust found 42% of non-retired households have less put aside than would be needed to cover the average month's worth of household bills at £2,125.20.
Some 5.5 million households across Britain owe more in debt than they have saved, according to the findings.
The trust said many families are also vulnerable to one-off financial shocks. Over a quarter (28%) of non-retired households have too little saved to pay the £540 typically needed for a boiler to be replaced.
The trust made the findings after analysing Office for National Statistics (ONS) figures.
It has urged the Government to scrap plans to introduce a Lifetime Isa next year and instead use the funding to boost the Help to Save scheme, which aims to encourage low-paid workers to build up a rainy day fund.
Help to Save accounts will be available no later than April 2018 under the Government's plans. They will be will open to millions of employees who receive in-work benefits.
Lifetime Isa accounts will be available from April 2017 and will boost the savings of people, aged between 18 and 40, who are saving for their first home or their retirement.
The trust claimed current policies favour those who are already well off by offering tax efficient savings through Isas, and bonuses through the new Lifetime Isa.
Executive Director of the Equality Trust, Dr Wanda Wyporska, said: "The Government must change direction and offer greater support for its Help to Save scheme, rather than projects such as the Lifetime Isa."
Benefit sanctions lead to increase in foodbank use, study claims
There is a strong link between increased benefit sanctions and higher foodbank use, a study suggests.
Researchers analysed three years of data from The Trussell Trust to conclude that penalising benefit claimants financially saw a rise in people turning to foodbanks for help.
The Wiltshire-based foodbank provider is now calling for the 'yellow card' warning system being piloted in Scotland - giving claimants 14 days to appeal before a financial sanction is imposed - to be extended across the UK.
University of Oxford researchers analysed foodbank data from 259 local authorities between 2012 and 2015 and they found as the rate of sanctioning increased within local authorities, the rate of foodbank use also increased.
Even after accounting for differences between local authorities, their modelling showed that for every 10 additional sanctions applied in each quarter of the year, on average five more adults would be referred to Trussell Trust foodbanks in the area.
As sanctioning decreased, foodbank use also decreased, which the report suggests is evidence of a strong link between sanctioning and people not having enough money to meet basic needs.
The findings are from the first phase of a 16-month study into how trends in foodbank usage over the last four years relate to changes in the economy and welfare system.
The report said foodbanks in the Trussell Trust network experienced a spike in numbers after 2013, when over one million sanctions were applied.
Foodbanks distributed three times as much over the period - from just under 350,000 three-day emergency food supplies in 2012/13 to around 913,000 in 2013/14.
Lead author Dr Rachel Loopstra said: "These findings show clear evidence of sanctions being linked to economic hardship and hunger, as we see a close relationship between sanctioning rates and rates of foodbank usage across local authorities in the UK."
The Trussell Trust is recommending the introduction of a warning system with a non-financial 'yellow card' penalty to first try and engage the claimant in a constructive dialogue without the immediate threat of financial penalty.
Adrian Curtis, from The Trussell Trust, said: "The findings from this ground-breaking study tell us once and for all: the more people sanctioned, the more people need foodbanks.
"We now need to listen to the stories behind the statistics: families go hungry, debt spiral, and the heating doesn't go on even as temperatures drop.
"There is much to be hopeful about - we're very pleased to see sanctioning rates have decreased and that the new Secretary of State has announced that work capability re-assessments for employment and support allowance claimants with incurable or progressive illnesses have been scrapped.
"However, we still see people being referred to our foodbanks who have been sanctioned unfairly.
"A true 'yellow card' system, which gives people a non-financial warning first, would mean less people thrown into crisis and ultimately, less people needing foodbanks."
A Department for Work and Pensions spokeswoman said: "The reasons for foodbank use are complex, and it is misleading to link them to any one issue.
"We're clear that work is the best route out of poverty, and the number of people in employment is at a record high, up by 2.7 million since 2010.
"We continue to spend £90 billion on working age benefits to ensure a strong safety net, providing hardship payments, benefit advances and budgeting loans for those who need them most.
"Sanctions have fallen sharply over the past year, with JSA and ESA sanctions both halving."
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