Poverty, household debt and COVID-19
Professor Karen Rowlingson from the Centre on Household Assets and Savings Management (CHASM) at the University of Birmingham undertakes research focused on the effects of Covid-19 on household debt and recommends short term measures to avoid a catastrophic increase in poverty and household debt in the coming months.
Executive summary of the report
- Despite unprecedented Government action, the COVID-19 crisis looks likely to result in a significant rise in poverty and household debt in the UK in coming months. Already prior to the outbreak, 3 million people in the UK were behind with one or more key household bills. Since then, COVID-19 has resulted in significant increases in claims for Universal Credit, with an estimated 18% of the total workforce seeing their hours cut, being laid off or made redundant.
- Renters, especially social housing tenants have been worst hit, with four in five social housing tenants either working in sectors directly affected by the lockdown, unable to work from home, or with caring responsibilities for school-age children, compared to only half of homeowners.
- Charities that normally support households in poverty are struggling to meet the increased need whilst operating under lockdown.
- Though unparalleled steps have already been taken, to avoid a catastrophic increase in poverty and household debt in coming months the Government should consider the following recommendations:
- Ending or suspending the overall benefit cap so that increases in benefits can be felt by those in high-rent areas and those with larger families.
- Child benefit payments should be increased as a cost-effective way of getting money to families quickly. A modest £10 uplift would reduce child poverty by around five percentage points and householder poverty by one to two percentage points – more than is achieved by the £20 increase in universal credit and working tax credit.
- Ensuring people can access local crisis grants easily and promptly.
- Providing central government funds to local authorities, housing associations and landlords so that they can offer rent/council tax payment holidays to those who need it.
- Working with regulators and creditors to protect those who fall behind on essential bills and credit commitments by pausing all forms of collection and enforcement activity.
- Longer-term more fundamental change should also be considered, such as a universal basic income, as a way of building a more financially resilient system of social security for the future.
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