9 June, 2020 Open access
9 June, 2020 Open access
Debt charity sets out three key recommendations to enable a less painful exit strategy from the COVID-19 crisis
Radical action is needed to prevent a 'personal debt tsunami' following the coronavirus (COVID-19) pandemic, the debt charity StepChange has warned.
Highlighting that around £6 billion of personal debt is already being stored up among 4.6 million households as a direct result of COVID-19, StepChange predicts that this is set to worsen unless radical action is taken.
Pointing out that it is 'within the government's gift' to mitigate some of the worst effects, StepChange sets out three main focus areas that would help the maximum number of households transition back to a sustainable financial position, and in turn reduce prolonged, long term pain to the wider economy -
Households struggling with arrears and debt should be provided with strong protections against housing insecurity and unaffordable repayment demands -
Households negatively affected by coronavirus should be provided with grants to address arrears and debt accumulated to pay for essentials during the crisis -
The social safety net should be a source of financial resilience for struggling households -
Commenting on the recommendations, StepChange Chief Executive Officer Phil Andrew said -
'We were already dealing with a debt crisis, but COVID has so far added another four million people and counting to the number who are gong to need help finding their way back to financial health. With £6 billion of additional household debt directly attributable to the effects of the pandemic, this is a problem that isn’t going to solve itself.
Cost might be seen as a barrier to the recommendations we outline. However, the costs of not intervening would ultimately be higher. The misery, damage and economic drag that will inevitably follow the pandemic can and should be mitigated through public policy, and the approaches we suggest are the biggest game-changers.
As a charity, we have our own part to play. Like other debt charities, we are gearing up for a significant increase in demand for our usual services.
We are also working on a specific solution to help people whose finances have been hit by the pandemic and who need a short term helping hand to get back on track without jeopardising their credit status.
The false calm in which we find ourselves while furlough and forbearance take the strain will not last indefinitely. We will be ready to help as more people find their debt problems crystallising over the coming months.'
For more information see Post-Covid personal debt tsunami inevitable unless radical relief is given from stepchange.org