A report from the Social Security Advisory Committee has warned that anyone who loses their job will be at least £40 poorer as a result of changes to the way the government will pay their benefits. To make matters worse, they will have to wait longer for their first payout - which will make many of them easy prey for loan sharks.
So how can you protect yourself?
New rulesAt the moment all new claimants for Jobseekers' Allowance or Employment Support Allowance have to wait three days before they are eligible for help. The SSAC has launched a consultation into proposed new rules which would extend this to seven days. The clear driver is to save the government money, but this comes at a price.
In announcing the consultation, the SSAC highlighted that Jobseekers' claimants will lose £40 on average, while disabled people will lose £50. The TUC estimates that each year, over 1.3 million people will be affected by the change.
Not only will they be worse off, but the gap between their last pay cheque and their first benefits payment will be longer. This is exacerbated by the fact that welfare payments are paid fortnightly in arrears.
TUC General Secretary Frances O'Grady said: "Forcing people to wait for job support will not help anyone find work. Instead it will make them easy prey for loan sharks. This has nothing to do with making work pay. It is simply a mean attack on the welfare safety net and could affect any one of us."
According to StepChange, unemployment is the single biggest cause of all debt problems. It's the root of the problem for around a quarter of all those who seek help with debt.
This is hardly surprising: we make spending commitments and develop habits while we are employed, so we spend what we can afford. However, when our income drops dramatically or disappears, we still have the same commitments and the same habits - and unless we can find a way to meet the cost or spend less immediately, we are bound to hit problems.
What can you do?No-one is entirely safe from the threat of losing their job, so it's worth thinking carefully about how you would cope. You may have accident, sickness and unemployment insurance. If that is the case, it's worth checking the small print carefully to ensure you have the cover you expect.
By far the best approach is to build up a financial safety net. You need to have a fund that will cover the absolute basics in the first month of unemployment. This will protect you from any delays in getting benefits or finding work. It will also give you a small window in order to slash your costs without running into difficulties.
For most people this fund will need to be hundreds of pounds, for some people it could be £1,000 or more. This is not something you can build up overnight. However, it's important to put aside as much as you can, as quickly as you can. It may seem like quite a stretch now - but it's the only way to protect yourself in an uncertain economic climate.