POORER households’ ability to cope financially is deteriorating while the wealthy weather the coronavirus storm, according to a study that has sparked calls for a strengthened welfare system.

Some 38 per cent of those on the highest fifth of incomes have had their spending reduced while their incomes have remained the same or even grown, enabling them to strengthen their overall household budget, the Resolution Foundation said.

But in what the think tank described as a “big divide” in how families are faring financially, just 12 per cent of those in the lowest income fifth have been able to strengthen their budgets.

More than half (57 per cent) of the richest fifth of families have been able to reduce their spending since the crisis began and 10 per cent have even cut their spending by more a quarter.

By contrast, only 30 per cent of the poorest fifth of households have had the chance to cut their spending.

People in the low-income bracket are nearly as likely to have increased their spending during the crisis (27 per cent) as they are to have reduced it, the Foundation said.

And poorer households are much more likely to say that their ability to manage financially has worsened than improved.

But those in the top fifth, despite the catastrophic impact of Covid-19 on many people’s finances, are about as likely to say their position has improved as they are that it has worsened.

Resolution Foundation research director Laura Gardiner said: “Those on lower incomes have found it far harder to reduce spending which, when combined with income falls, means many are seeing their ability to manage financially deteriorate.

“As policymakers prepare their plan to support Britain’s recovery, they must prioritise strengthening the family finances of low-to-middle-income households.”

Iain Porter, an expert in social security at the Joseph Rowntree Foundation, said poorer families are often less able to protect finances during a crisis due to increased bills, loss of income and support services, and diminished savings.

He told the Morning Star: “Rising costs and increased bills, combined with disruption to foodbanks and advice teams, mean some families are really struggling to keep their heads above water. 

“We believe in looking out for each other when times been tough, and there have been some shining examples of this during the last few months.

“But to make sure every struggling family gets a lifeline, the government must urgently boost social-security support for families on low incomes.”

Liz McKean, War on Want’s director of campaigns, policy and international programmes, said it is “no surprise” that the poorest households are hardest hit during the crisis.

She told the Star: “In these circumstances, there is little that can be cut from a budget, no expenditure that can be reduced, and nothing left at the end of the day to put aside as savings.

“The pandemic has highlighted the extent of economic inequality in the UK and globally, and the reality of a global economic system that has concentrated wealth, resources and power in the hands of the few.

“There has never been a more urgent need for a just economic recovery that redresses this corrupt system. We must demand bailouts for people, not corporations.”

Labour’s shadow chancellor Anneliese Dodds MP said: "We entered the Coronavirus crisis with a quarter of UK families with less than £100 in savings. As the crisis has progressed, many of these families have been forced into avoidable debt.

“We have called directly on the government to make key changes to Universal Credit, legacy benefits and Statutory Sick Pay, which would prevent many families from falling into debt in this way.

"In the long-term the government must tackle the fragmented labour market and poverty pay which has caused so many families to be so lacking in financial resilience in the first place."