UK ‘sleepwalking’ into crisis as household debt skyrockets to £10bn

Covid-19 has caused household debt to skyrocket and forced millions of families into rent arrears, new research has found. 

The StepChange Charity said Covid-related household debt had hit £10.3 billion since the start of the pandemic and called on the government to provide more targeted support.

Phil Andrew, the charity’s chief executive, said the country was “sleep-walking” into a crisis and the worst was “yet to come” if the government didn’t change course. 

“Despite a bold initial reaction to the pandemic, the government and financial services sector’s toolkit of responses has not evolved, and the result is a spiralling number of people being plunged into debt due to Covid-19,” he said. 

We're working with plenty of like-minded partners to prevent homelessness and protect jobs during the Covid-19 crisis. We need you in our Ride Out Recession Alliance too https://t.co/s5gbhfgbSq

— The Big Issue (@BigIssue) November 10, 2020

The new report found the number of people affected by Covid who are in “severe problem debt”, defined as meeting three or more of the charities eight indicators, has risen to 1.2 million, nearly doubling since March. 

StepChange also found that 3 million people in total are at risk of falling into long-term financial difficulty. 

The charity said 14.9 million people, almost 30 per cent of the adult population, have experienced a “negative change of circumstance” such as redundancy, furlough or a salary reduction. 

A further 7.1 million have fallen behind on essentials or had to borrow to make ends meet, with those between 25 and 34 most likely to be struggling. 

“The furlough scheme has been extended, mortgage holidays have been extended. Why, then, has the Government failed to extend protections against eviction?"https://t.co/dd5VSu9hfP

— The Big Issue (@BigIssue) November 8, 2020

The UK’s furlough scheme has been extended following England’s second national lockdown, but there are fears it may not be enough for those who have already been made redundant. 

StepChange is calling on the government to introduce no-interest loans with deferred repayment which depends on income. 

Andrew added: “This winter, a second national lockdown will drive unemployment, reduced hours and rising energy bills, all of which is hampering economic recovery. 

“Without a bold, long-term vision for those financially affected by the pandemic, there is a real danger of lasting economic and social damage that will deepen inequality, jeopardise the government’s levelling-up ambitions and act as a drag on economic recovery.

Do you know someone who has found themselves in temporary financial difficulty because of the pandemic?

Find out more about the ways we can help them get back on track: https://t.co/CXwxEwrLoC pic.twitter.com/hQXUZ2dUx1

— StepChange (@StepChange) November 11, 2020

“Strengthening short-term protections like furlough will buy time for those experiencing temporary financial difficulty. 

“Now we need to see the Government provide targeted funding that can enable households to exit safely from coronavirus debt.

“Concentrating support in this way can reduce the hardship and damaging impact of long-term debt on health, mental health and the economy, as well as countering the impact of coronavirus on inequality.”

Have you been affected by the economic impact of the coronavirus pandemic? The Big Issue is committed to supporting its readers and find ways to help people stay in their jobs and in their homes through our Ride Out Recession Alliance. Send your stories and ideas to rora@bigissue.com to help us support those who need it most.