27 October, 2021
StepChange Debt Charity says that today’s Budget is good in parts – but that many lower-income households who accumulated debt during the pandemic are still deep in a hole from which a helping hand from the State to climb out remains too far away to reach.
The main positive take-aways from today’s Budget and the pre-announced measures of the past few days for people experiencing problem debt are the change in the Universal Credit taper that will allow people to keep more of their benefit as they increase their income from working, along with the rise in the national living wage, the additional support for rent arrears and an increase in affordable housing.
However, overall, lower income households – who are disproportionately represented among households experiencing problem debt - are still likely to be worse off than they were before the £6 billion of temporary uplift to Universal Credit was withdrawn, with increased National Insurance contributions also looming for many households from next year.
The Government had already pre-announced £65 million of support to be delivered through local councils to help lower earners with rent arrears – just a fraction of the £360 million of rent arrears built up during the pandemic, but nevertheless very welcome. Similarly, the increase in the National Living Wage was also pre-announced, and is also welcome. However, among lower income clients turning to debt advice, an increasing proportion are still likely to face a deficit budget, with their expenditure on basic essentials exceeding their outgoings, even before trying to find ways to repay their debt.
Peter Tutton, Head of Policy, Research and Public Affairs at StepChange Debt Charity, said:
"Among our clients, lower income households are disproportionately represented among those experiencing problem debt, and today’s measures – while helpful - won’t shift the dial on this much. The improvement to the Universal Credit taper is very welcome – although while 2 million working households will benefit, millions of others will not. A third of our clients experiencing problem debt claim Universal Credit, and they are already experiencing the rising costs of costs of fuel, energy and food, together with the Covid backlog of rent and council tax arrears, and unaffordable deductions from their payments which push them further into debt.
Of course we welcome the incremental improvements to increase the minimum wage and address some of the structural flaws of Universal Credit, as well as the recognition that rent arrears will not resolve themselves and will lead to a significant rise in evictions without support. The big picture, though, is that social security safety nets are simply not adequate to ensure that people who are forced to rely on them are able to make ends meet. Alongside longer term reform, we would urge the Government to stand ready to offer further support, beyond the Budget measures announced today, to those who need it most.
Media enquiries
General – 0207 391 4598 // press@stepchange.org
Out of hours – 07985 404153