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We respond to Budget: more will still be needed to help those hit hardest

Government needs to set out long-term recovery plan for household finances crippled by Covid

3 March, 2021

Today’s (3 March 2021) Budget announcement extends much-needed support for people who have been financially affected by the pandemic. In particular, the extension of the furlough scheme until September is welcome recognition that the financial effects of Covid will be felt for many months to come.

Changes to Universal Credit, including the six-month extension of the £20 uplift, the limiting of deductions to 25% and the bringing forward of the extension of the advance repayment timeline to 24 months will help to keep millions of heads above water while national restrictions continue to be in place.

Questions remain, however, about how those in financial difficulty will be supported once support mechanisms are removed.

Our research shows 1.2m people affected by Covid are in severe problem debt with a further 3 million at risk of it – if they are not helped back to their feet, it will act as a drag on any consumer-led recovery.

Successive autumn and winter lockdowns have prolonged income reductions for those in affected sectors, as well as rises in costs for families caring for children. Meanwhile, unemployment is rising and is likely to peak later this year.

We are warning that more action is needed to protect people from hardship and provide safe routes out of financial difficulty for those struggling with arrears and debt in the wake of the pandemic.

Richard Lane, Director of External Affairs here at StepChange, said:

“The extension of the furlough scheme until September is a crucial acknowledgement that, while the country may be hoping to be ‘back to normal’ by the end of June, millions of households’ finances will be anything but. This principle needs to be reflected more widely in other support, too.

“The extension to the £20 uplift to Universal Credit will provide short-term relief to millions currently relying on it to feed their families, pay their bills and keep their homes, however the one-off payment of £500 in working tax credits risks eating into the existing debts of anyone with a negative budget or in problem debt rather than providing the much-needed boost to day-to-day income of a regular payment.

“That’s why StepChange is calling for the £20 uplift to Universal Credit and the boost to working tax credits to be kept permanently – unemployment is set to be at its peak in 6 months, and if these measures are dropped people relying on them will be faced with the lowest relative level of unemployment benefit in nearly 20 years.

“People behind on their rent also need support to avert the real risk of mass housing insecurity and homelessness – it's disappointing that the Budget did not recognise the urgency of this need.

"While it is helpful to see the Government's continued commitment to the No Interest Loan Scheme pilot today, the need to learn quickly from this and urgently scale up the concept is clear.

"In particular, we need the Government to create a system of grants and interest-free loans that will allow renters to deal safely with arrears built up over the course of the pandemic.

"Without these types of support, the Government risks hampering the ambitious plans the Chancellor has set out for economic recovery.”

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