Broke Britons put economic recovery at risk

Warning for Osborne as survey shows half of those on middle incomes live hand-to-mouth

George Osborne is under mounting pressure from Conservative MPs for a change of economic course amid new signs that the squeeze on household budgets is choking Britain's fragile recovery.

Backbench Tory leaders are becoming increasingly jittery about the country's flatlining economy and fear it could cast a shadow over the party's annual conference in October. They are pressing the Chancellor to trail a go-for-growth package in his conference speech to counteract problems beyond his control in the eurozone and the United States.

Anxiety will be increased by a survey published today showing that fewer than half of Britain's 11 million low to middle-income earners have any money left over at the end of the month – another blow to hopes that the economy will pick up after the 0.2 per cent growth seen between April and June.

Tory MPs admit that increasing food and fuel prices and inflation running above pay rises are leaving many families with no spare money for goods and luxuries that could spur the recovery.

Mark Pritchard, MP for The Wrekin and secretary of the 1922 Committee of Tory MPs, told The Independent: "The course the Chancellor has set is the right one. Unfortunately, global economic forces may be blowing that strategy off course. If that is the case, the time is coming soon when targeted tax cuts which grow businesses and jobs may be required.

"If the economy does stagger in the next quarter, the Chancellor will have justified mitigation, given the unprecedented downturn in global economic conditions."

Research by Ipsos Mori for the Resolution Foundation think tank found that 48 per cent of people in low to middle-income households – defined as having a gross income of between £12,000 and £48,000 a year – have any cash left over at the end of each month. This is compared with 66 per cent among higher-income households.

Fewer than three in 10 (27 per cent) of low to middle-earners make any monthly savings, compared with 47 per cent of those on higher incomes.

The poll also reveals high levels of anxiety about job security. Only two in five (41 per cent) of those in work said that they felt secure in their jobs; among part-timers, the figure dropped to 33 per cent. One in four of the 1,980 people surveyed expect their financial position to get worse over the next year.

The foundation warned that low household spending, which makes up about two-thirds of gross domestic product (GDP), is dampening growth. Gavin Kelly, its chief executive, said: "Working people in low to middle-income households continue to be squeezed from all angles. Everyone is saying that households need to save more and run down their debt – but this new poll shows just how hard that will be.

"Families simply cannot afford to put money aside. This is a worrying picture both for the financial security of Britain's households and for the economy."

The Chancellor has rejected calls for a "Plan B" but has tried to calm Tory nerves by promising a new package to stimulate growth. Senior members of the party believe the anaemic state of the UK economy has been masked by the media coverage of the eurozone crisis, the phone-hacking scandal, the riots and events in Libya. They are worried that the party will suffer a public backlash unless there is stronger growth in the third quarter.

Case studies...

Jennie Wright, 38. Phlebotomist from Lewisham, earns £18,000 per year

Do I have any money left over at the end of the month? Is that a joke? I'm in several thousand pounds worth of debt and I can't see a way out of it.

Two years ago I was diagnosed with leukaemia, but I still enjoy going to work. I love the idea that through my job, I'm taking people's blood so that somewhere down the line they can feel better. Having cancer isn't the easiest thing in the world, but you just put a smile on your face and get on with it. I do get some disability allowance – but I hate the word 'disabled' – that's not how I see myself.

My spare money goes on my kids, Meshack (17) and Megan (15). I suppose they're no different to other teenagers – they need things, obviously, to keep up with their peers, but they're considerate and well behaved, and they understand that they can't always have what they want.

With the changes to the NHS, I don't feel secure in my job. I feel like it could be taken away from me tomorrow – which is a shame, because I love feeling like I've made a difference.

My biggest expenses are my rent, which is £500 a month – which isn't bad for London – my gas and electricity and my car. I cut back wherever I can. A while back I swapped branded foods for supermarket own brands – they taste bloody putrid, I can tell you! If you can afford Kellogg's, eat Kellogg's! Whenever there's a "buy one, get one free" offer, I really indulge.

The Government could do more to help people like me, but I know it's hard to keep balance. What you give to one person you take away from another. I feel like I've taken my individual responsibility, but then I'm still in debt.

Anthony da Silva, 43. Security officer from Dagenham, earns £18,200 a year

Saving in this climate is impossible. I earn £10 an hour as a security officer on a contract, and by the time I've paid our monthly mortgage bill of £800 we have virtually nothing left for anything else. Everything's fine immediately after payday, but after a couple of weeks go by it's a real struggle.

I'm a contract worker, so if we're running out of money I try to find extra shifts as a nightclub doorman – anything to enable me to pay the bills and feed my family.

I have two children, Anthony, 7, and Christine, 5. When I take the extra shifts, I do worry about them, even though I have a partner who works as a beautician who can look after them. It's a balance – do I give the kids what they want financially, or do I spend time with them as a family?

Life has become harder for everyone. A couple of years ago, the same amount of money would have gone much further. But people are more willing to be generous. If my brother or my friends need money when they're hard up, I give it to them, and vice versa. Rather than the Government looking out for people, people look out for each other.

Interviews by Liam O'Brien

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