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We must find a way to confront the emerging low-income debt crisis

Shelter estimates that 174,000 households have already been threatened with eviction, and as the crisis continues more will be handed notice, writes Lord Bishop of St Albans. | PA Images

4 min read

Millions of families are facing economic uncertainty due to Covid-19. Mitigating the lasting economic consequence of the pandemic must now be of equal priority to preventing Covid-19 transmission.

“I don’t answer the door, or answer the phone if I don’t know who it is. I know I can’t pay the rent, I am scared it might be him asking for it. What can I say? I have no money, I can’t earn money now and I can’t get benefits.” 

Leanne’s testimony is just one of many included in the recent report, Reset The Debt, from four national Churches on the impending household debt crisis. Her hardships are being replicated in millions of lives across the country; a harsh exposition of the shattered economic security wrought by the Covid-19 pandemic.

I do not envy the impossible position the government finds itself in. Being caught between reducing cases and maintaining an open economy requires the finest of margins. Although it is right to keep the focus on lives taken, we must not neglect the tertiary consequences and financial ruin stalking the well-being of many people.

There is good cause for going further in making the next generation the focus of our concern. Even though many young people are not at high risk from the virus, they will be affected by its consequences.

Research from the Joseph Rowntree Foundation revealed the extensive increase in borrowing due to the crisis, with 6 in 10 families with children on Child Tax Credits or Universal Credit affected. Borrowing is only ever a temporary solution. Once lines of credit run dry, unpayable arrears quickly build up, and evictions soon follow. Homelessness charity Shelter estimates that 174,000 households have already been threatened with eviction, and as the crisis continues more will be handed notice.

The adverse financial effects of Covid-19 have not been equitably distributed across society, with historically marginalised groups more beset with repayment difficulties compared to their counterparts.

Those required to shield, simply by having the misfortune of a vulnerable health condition, are nearly four times more likely to have fallen behind on payments. Likewise, disabled and BAME individuals are suffering at a higher rate compared to non-disabled and white people. Important as this is, it should not deflect from the truth that those affected are scattered across the populace and deserve help based on their externally imposed poverty.

Once we return to normalcy, these pre-crisis breadline families may find themselves with an unrealistic debt load burdening them for many years

Landlords, though not the usual recipient of public sympathy, similarly deserve a fair hearing. Given that 94% of landlords are private individuals relying on the income they receive from renting out one or two properties, their anxieties arising from long-term income loss ought not to be dismissed either.

Once we return to normalcy, these pre-crisis breadline families may find themselves with an unrealistic debt load burdening them for many years. Financial uncertainty, along with the deteriorating mental health which it accompanies, contributes to societal ills such as domestic abuse and child maltreatment.

Such a concatenation of consequences requires inventive policies to tackle the issue at source. Accusations of parsimony towards the Government are unfounded given the costs of the crisis have been estimated at over £300 billion; however, the reality is that only by, to use the idiom, ‘throwing money at the problem’ can we begin to restore financial security to the millions of people who have fallen behind through no fault of their own.

Mitigating the lasting economic consequence must now be of equal priority to preventing the virus' transmission, and a one-time debt relief programme, or ‘Jubilee Fund’, as proposed by the ‘Reset the Debt’ campaign, could be one solution.

Whichever way the Treasury chooses to confront the emerging low-income debt crisis, adequate funding combined with bold thinking will be required.

There is a societal responsibility not to condemn the unfortunate economic casualties of Covid-19 to years of needless hardships. Families across the country are already suffering, and relief is desperately needed. If we fail to act now, then we resign ourselves to the prospect of a future generation who recall only penurious younger years rather than the secure childhood they deserve.

A full copy of the report can be found HERE.


Lord Bishop of St Albans is a non-affiliated member of the House of Lords. 

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