More than 10 million families are struggling to make ends meet as the UK's economic woes continue to bite into family incomes, The Independent on Sunday can reveal.
And 10 per cent of the nation's 25 million households are under such extreme financial pressure that they have been forced to default on household debts including mortgage repayments, according to an extensive survey by the consumer group Which?.
Research from the organisation detailing the lengths families are forced to go to shows that more than a third of the population – amounting to 10.2 million households – are feeling the squeeze as the gap between income and spending narrows.
Some 2.3 million households have defaulted on a loan, bill or housing payment, and 1.5 million have taken out one or more unauthorised overdrafts or payday loans to help cover their living costs.
Barely a quarter of 2,100 people questioned report that they are living comfortably on their incomes. Which? claims its figures have shown a consistent level of defaulting for at least six months.
The findings are the latest in a series of dismal revelations about the cost of living and its impact on families across the country. Thousands of people are relying on food banks, and the charity Save the Children has launched its first poverty campaign in Britain. New figures have shown that one in 10 children's centres have closed since the coalition government was formed. A total of 381 out of 3,631 Sure Start centres have closed since April 2010, and 100 of those closed in the last five months.
The revelations come just days before the Chancellor, George Osborne, is expected to declare that it would be a "disaster" to turn away from economic austerity. Regardless of the increasing hardship faced by millions of families, he is expected to turn the screw still further in his Autumn Statement on Wednesday with a multibillion-pound package of cuts, including a freeze in some benefits for those out of work.
The Chancellor is to tell the country that, with Britain emerging from a double-dip recession, it is on the right track to economic recovery and that his Plan A is working, even though he is expected to miss his public borrowing targets.
Mr Osborne is expected to put on hold a planned rise in fuel duty and may announce further measures to help with council tax bills for struggling home-owners. Last year the Chancellor announced a two-year freeze on council tax bills, up to 2013, but he could extend it beyond next year. A Treasury source said: "While it was always going to be a hard road to recovery and it may be taking longer than we hoped to put things right, Britain is on the right track, and turning back now would be a disaster.
"The credibility we have earned is still paying off: the deficit is down by a quarter, business has created a million jobs and the world has confidence that Britain can pay its way. We'll be showing at the Autumn Statement that we are serious about being one of the winners in the global race."
Richard Lloyd, executive director of Which?, said: "With 10 million households feeling the squeeze and consumer confidence remaining low, the Government has a job on its hands to convince people that everything possible is being done to keep unavoidable costs like energy and food bills under control.
"We're looking for further progress in reforming the energy market, an end to misleading food price promotions, and more competition in banking to take some of the pressure off hard-pressed consumers."
The Department for Education (DfE) said last night that the fall in Sure Start numbers, revealed in Ofsted's report on early-years education last week, was partly explained by centres being merged. But the charity 4Children claims that a fifth of children's centres are now charging for services that used to be free.
Although local authorities are responsible for funding Sure Start centres, the Government removed the ring-fencing for them in 2010, and councils blame the closures on 40 per cent cuts to budgets from Whitehall over this Parliament.
Sharon Hodgson, shadow children's minister, said: "Before the election, David Cameron promised that he would protect Sure Start children's centres. But just in the last five months, the Government has cut another 100 centres.
"Many of those that remain are being hollowed out – charging for services that used to be free, or not providing childcare on site.
"The Tories are punishing parents, particularly mums who just want the chance to go back to work – female unemployment is sky high. Hard-working families are being hammered by a triple whammy of higher childcare costs, fewer children's centres and less support through the tax system."
A DfE spokeswoman said: "We are targeting spending directly to the families who need the most support. There is currently a network of 3,330 Sure Start centres open to all, but now better targeted at the poorest children. Since April 2010 some centres have merged to deliver services more efficiently, but less than 1 per cent have closed. We are also giving the parents of the most disadvantaged two-year-olds 15 hours of free childcare per week."
The income squeeze
James Smith, 36, works full-time for Leicester City Council, and his wife, Mary Adams-Smith, 35, works part-time as an accounts assistant for Holiday Inn. They have two children and recently sought debt management advice because they were no longer able to pay their debts...
"We are under pressure. I recently lost £200 a month when a delayed downgrade of my job from two years ago kicked in.
"Before that we were just about meeting our debt payments. The debt was a large chunk of our outgoings – between £500 and £600 a month, or even more – through either loans, credit card payments or interest on overdrafts.
"At the same time petrol prices rose so our petrol budget increased. Food prices went up by 5 to 10 per cent. And along with that parking prices near where my wife works went up by 20p a day. We were getting more and more squeezed.
"Then the tax credit change came in last April. We were getting £29 a week in tax credit before that, for school dinners, our toddler's swimming and the kids' general living costs. That went down to £12 a week.
"We haven't got savings because we haven't got enough to be able to save and neither us have got pensions even though we're in our thirties. Our childcare costs are £600 a month to pay for our three-year-old, who is in nursery, and the after-school costs of our seven-year-old.
"We were trying to live on a smaller and smaller household budget and then having to pay for food and petrol. So when my wages went down it took us over the edge.
"Unless our jobs change we are completely bottomed out. We've now had to get advice from a debt-management company called Christians Against Poverty.
"They have helped us budget and worked out deals with our creditors on our behalf, which has at least taken the pressure of the debts off our shoulders."