People working and claiming benefit at the same time do so as a last resort because they are living in acute poverty, a new report has claimed.

The report from the Joseph Rowntree Foundation found that for people in low-paid informal work, “need not greed” was the reason they continued to claim benefit while working, as they needed to pay for food, heating or mounting debt.

The report said informal work was often a response to poverty or crisis such – as family breakdown. It showed how low benefit rates and low wages were the drivers for most informal work. In addition, the research highlights how childcare or health problems can act as barriers to formal work.

The report also cited a complicated and inefficient tax and benefit system as one of the main reasons that people resorted to informal low-paid work. It claimed that people often felt the system trapped them in a cycle of poverty with few financial incentives to work formally.

The report claimed people should be given more training and development to allow them to move into formal work. And it called for tax and benefit reforms to recognise why people worked informally.

Aaron Barbour, report author, said: “People in deprived areas are resorting to informal paid work because they are trying to support, feed and clothe their families. They are hard-working, ordinary people trying to survive day by day. The Government needs to understand and include the informal economy in all its strategies if it is to reach its employment, anti-poverty and regeneration targets.”