Covid-19: Household Debt

Patricia Gibson Excerpts

Thursday 8th July 2021 Westminster Hall

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

Like so many, I begin by paying tribute to the hon. Member for Makerfield (Yvonne Fovargue) for securing this important debate. We can all agree that with many households having suffered a prolonged fall in income as a result of the pandemic and with unemployment rising, the problem of household debt is increasingly worrying, with 14 million people having undergone an income shock over the course of the pandemic.

We have heard much today about the charity StepChange, which I am sure we all want to pay tribute to. That charity has found that 4.3 million people are now behind on basic bills such as rent, fuel or council tax, with 2.8 million people now borrowing simply to make ends meet, accessing high-cost credit that means they are more likely to be locked into a cycle of debt in the longer term. Indeed, 2.4 million people are facing long-term debt problems, which inevitably means that increasing numbers of people will face the threat of eviction and homelessness down the line.

One of the great injustices that people face in every constituency across the UK is having to pay more for their essentials, and we have heard much today about the poverty premium. The cost of accessing credit can be considerable for some people in our communities, trapping them in high-interest debts that so many of them will find difficult to manage and almost impossible to escape. As we work to emerge from this health pandemic, it is very important that inclusion is baked into all essential services, so that the pricing of all products and services is fair to all users. When necessary and appropriate, the Government should regulate the market to make sure that that happens. The poverty premium is simply an unacceptable burden on those who are already struggling. The capping of interest rates is a very interesting idea, and I hope that the Minister will look carefully at it.

As we all look forward to a return to some kind of normality, those who have fallen into covid-related rent arrears face the very real prospect of losing their homes, and some are already facing eviction notices. With household debt linked to covid soaring to crisis levels, the chief executive of the debt charity StepChange has urged the Government to bring forward a long-term vision for those financially affected by the pandemic, to avoid the danger of lasting economic and social damage that will deepen inequality and act as a drag on any economic recovery. If there is to be the kind of covid recovery that we all want to see, it must be a recovery for all of us. We have a real opportunity to use the experience of this health pandemic to look again at how we do things; how we deal with the glaring inequalities that we all know exist; and how we can be more inclusive.

However, we cannot do that when so many people in my constituency of North Ayrshire and Arran and across the United Kingdom have lost their jobs or suffered an income shock that has driven them into debt—sometimes unmanageable debt—to help pay for essentials, which now threats to overwhelm them. Let us be clear: when people get into debt to pay for essential items, that debt is not born of profligacy, but of poverty. With many navigating the income shock that they have suffered and doing the best that they can—not least the 3 million who have been excluded from all financial support by the Government—this is not the time to pull back on the £20 per week universal credit uplift, nor is it the time to withdraw furlough payments before businesses have had the time to properly scale up their operations post-lockdown, which threatens potentially thousands more jobs.

Creativity and compassion are needed to ultimately address the debt and poverty crisis. In Scotland, the re-elected Scottish Government are using all the powers they have to alleviate poverty, which so often drives people into debt. For example, they have reached an agreement with local authorities to introduce universal free school meals for all primary 4 children, starting in August, as part of a £520 support commitment made to low-income families. A further £100 payment was made to coincide with the start of the summer holidays—which, in Scotland, is at the end of June—in addition to the £100 paid at Easter. A new school clothing grant has been announced to help low-income families with the cost of school uniforms: available each year, it has been increased from £100 to £120 for eligible parents with children in primary school, and to £150 for secondary school pupils.

A new £10 million grant fund has been established to support tenants who have fallen into arrears as a direct result of the pandemic. That is a unique scheme established to address this problem and a doubling of the game-changing Scottish child payment and the extension of free school meals in this Parliament, using every power at our disposal to tackle child poverty, which will disgracefully be undermined by the universal credit cut of £20. It is the kind of creative response that we need in order to help hard-pressed families. As the Scottish Government use all the limited powers that they have to address these issues, how much more could the UK Government do, with their control over a full gamut of powers, to create a more equal and socially just society? If that does not happen, the substantial inequalities that we currently see all around us will become even more marked, making our society less cohesive.

We are sitting, as a society, on a debt time bomb. In every constituency across the UK, people are living with constant worry about debt that they simply cannot see their way clear to paying off, not because they have been profligate or are living an enviable lifestyle, but because they have suffered an income shock through no fault of their own. They still need to feed their children, to consume energy and to pay for essentials. It is important that support is put in place for such people. Alongside this, the current plans to start withdrawing support, such as the universal credit uplift and furlough, are very worrying, as that can only exacerbate the current pressures and hardships that so many people are facing. I therefore urge the Minister to look carefully at all the concerns raised today and to bring forward the measures necessary to mitigate the misery that debt causes to families and, ultimately, wider society. Otherwise, the mantra of “building back better” will be empty and hollow words when so many are left behind.