Household Debt

Dear constituent,

Thank you for contacting me about coronavirus household debt and its impact on the poorest families.

I appreciate your concerns on this issue. According to the Office for National Statistics, the last year saw an increase in the number of people borrowing more money, and in larger amounts. By December 2020, nearly nine million people had had to borrow more money than usual since the beginning of the pandemic, with the proportion of those borrowing more than £1,000 also increasing. The Financial Conduct Authority, meanwhile, found in October 2020 that nearly two-fifths of adults anticipated struggling financially in the following six months. And as you highlight, this has had a particularly big impact on the lowest income families.

I therefore agree that this is an urgent problem demanding an effective solution. I note the Reset the Debt campaign’s proposal for a Jubilee Fund to provide grants to pay off and cancel unavoidable debt accrued by households during the lockdown. I hope the Government will give it proper consideration.

More widely, I believe more must be done to ensure the social security system is able to support low-income families struggling as a result of the pandemic and prevent them falling into debt. That urgent changes were required to Universal Credit at the start of the crisis to provide a basic safety net makes clear, in my view, that the social security system is not fit for purpose. I therefore believe the Government must cancel its plans to cut Universal Credit by £20 per week in October, which would not only mean families going without essentials and households being forced into debt, but also undermine our economic recovery. Instead, it should keep the uplift and extend it to legacy benefits until a new, fairer system can be put in place.

Thank you once again for contacting me about this issue.

Yours sincerely,

Peter Dowd MP