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Debt time-bomb lurks at end of Covid crisis, anti-poverty charity warns

22 January 2021

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MILLIONS of families that are dealing with stretched household budgets face a “debt time-bomb” when the coronavirus crisis subsides, the anti-poverty charity the St Vincent de Paul Society suggests.

Fewer people than usual are asking the Roman Catholic charity for help because most enforcement and eviction action has been temporarily suspended during the pandemic, and many creditors have cut back their collection efforts. “This, coupled with the temporary raising of the Universal Credit allowance and the suspension of benefit deductions, can lead to a false sense of security,” the charity’s debt-advice supervisor, Luke Denison, said. “They may not see the urgency in seeking help, as their debt problems appear to be on hold.”

Even working households are at extreme risk of debt problems. Many have experienced redundancy, or may be receiving 80 per cent of their usual income on the Government’s furlough scheme, yet still have to pay for items financed through credit, such as cars and mortgages. “Some working people . . . are putting off seeking help because they don’t see themselves as needing it, but their debt situation is there, and it’s getting worse,” Mr Denison said.

The charity believes that government help for people on low incomes is masking the scale of the debt problem. A recent report from the Money Charity said that 316 people a day were declared insolvent or bankrupt in England and Wales between last September and November, and figures from the think tank the Legatum Institute suggest that more than 15 million people in the UK are living in poverty: 23 per cent of the population. Also, the household incomes of 9.6 million people are 25 per cent, or more, below the official definition of poverty.

Online gambling-related debts are also increasing: “It’s easy to access, and highly addictive,” Mr Denison said. “More people are at home, and some even have more disposable income than usual due to savings on items such as commuting costs, which has led them to try online gambling. However, in most cases, ‘the house always wins,’ and debt can easily accumulate.”

The Society supports the Keep the Lifeline campaign to persuade the Government to make the £20-per-week Universal Credit uplift permanent. It is due to end in April.

Last month, almost 500 church leaders signed an open letter to the Chancellor, Rishi Sunak, asking him to work with communities, churches, charities, and creditors to create a comprehensive and just solution to lockdown debt (News, 11 December).

They wrote that they were concerned about the growing crisis of household debt. By last August, six million people had fallen behind on at least one household bill, and it is thought that subsequent lockdowns have increased the problem. Up to 350,000 households faced possible eviction over rent arrears.

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