How could the government support families weighed down by debt on 3rd March?

In the upcoming budget, the Chancellor will set out a the UK’s financial path. This will be an opportunity to offer support for those hit hardest by the pandemic, including businesses, workers and families.

In the budget, the Chancellor has the opportunity to do this by taking on the burden of families weighed down by debt because of Covid-19. But, as yet, the government haven’t given any indication of support for the millions of families forced into debt simply to make ends meet during the pandemic.

In January 2021, 750,000 families were behind on their housing costs. 5.6 million people are struggling to afford essentials such as food, heating and clothing, and more than 6 million families are behind on one or more household bill.

Without action, this is a crisis which could lead to serious consequences. Nearly 3 million people are at high risk of long term debt issues because of Covid-19. When the eviction ban ends, thousands are at risk of eviction because of arrears they have built up during the pandemic.

As Churches, with a presence in local communities and a commitment to the flourishing of all people, for us this crisis is about more than numbers. Debt doesn’t only affect balance sheets, but also damages the social and mental wellbeing of families – and even whole communities. People living in debt are 24% more likely to experience poor mental health. They are also less likely to participate in the economy, or to take chances for unemployment. The presence of unpayable debt effects landlords and businesses as well as tenant and debtors. The £10 billion of coronavirus related household debt in Great Britain is likely to deeply affect our ability to move forward from this pandemic together.

The pandemic has created levels of debt that our support systems were not designed to cope with

Existing mechanisms of support do not go far enough to address these additional challenges created by the pandemic. Government has provided more money for debt advice and introduced a scheme to give families breathing space while they get to grips with their finances. For many however the reality is that unrepayable debt will weigh heavily on their lives for years to come.

If this budget is going to enable everyone to move forward from the pandemic, then the government needs to recognise that the financial vulnerabilities created by the pandemic have hit the poorest in our communities hardest. Single parent families, young people, BAME communities along with disabled people are more likely to have fallen behind on rent and bills because of Covid-19.

As people of faith, we are committed to speaking out to ensure that everyone is given the support they need to move on from this crisis. But without action on debt, those who were just managing to stay afloat before the pandemic are now at risk of being swept under by circumstances entirely outside of their control.

We need an exceptional solution to these exceptional circumstances

In the budget on 3rd March, the Chancellor needs to announce an exceptional solution to these exceptional circumstances. The government have the opportunity to Reset The Debt, and take on the burden of debt weighing heavily for low income families by creating a jubilee fund. This would create funds to buy up and take responsibility for debt accrued by households during the pandemic. This might include debt held by local authorities in the form of Council tax arrears, and arrears to utility companies and private and social landlords.

By doing so, the Chancellor would lift the burden of debt created by the pandemic from those in our communities least able to shoulder its weight. As we call on the Government to Reset The Debt we are inspired by the biblical principle of Jubilee, which invites debts to be rebalanced and communities restored. This is the kind of vision we need as we face this crisis.

Thinking beyond a Jubilee Fund

Problem debt didn’t begin with Covid, nor will it end with a jubilee fund. We need a greater restructuring of the way problem debt is processed in the long term, to provide fair and just ways for families to move out of debt. The Government’s recent consultation on Debt Relief Orders (DROs) offers the chance to shape some of this in the short term. (See what our friends at CAPuk are saying about this here).

It is also crucial that the Chancellor recognises that household debt doesn’t exist in a vacuum. He must also address some of the crucial shortfalls in income for millions of families, which for many leads to a dependence on debt simply to make ends meet. On 3rd March, he can do this particularly by committing to extend the £20 per week uplift to Universal Credit, and seeking wider reforms to the 5 week-wait and other policies within Universal Credit. 

But without additional action to directly address the mounting debt crisis, families weighed down by debt are unlikely to find a stable platform from which to move forward. If left unaddressed, there will be glaring gaps in the government’s provision for those hit hardest by the pandemic. We must act now to ensure that this isn’t a crisis which weighs heavily on our communities for years to come.

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