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Covid-19: Household Debt
08 July 2021
Lead MP
Yvonne Fovargue
Makerfield
Lab
Responding Minister
John Glen
Tags
Business & TradeLocal Government
Word Count: 13685
Other Contributors: 11
At a Glance
Yvonne Fovargue raised concerns about covid-19: household debt in Westminster Hall. A government minister responded.
Key Requests to Government:
The Government should halt enforcement action for debts built up as a result of coronavirus, cease non-priority benefit deductions from universal credit, and extend repayments over a longer period. The £20 uplift to universal credit should be made permanent to give people the certainty and security needed to live on.
How the Debate Unfolded
MPs spoke in turn to share their views and ask questions. Here's what each person said:
Lead Contributor
The effects of the covid-19 pandemic on household debt have been uniquely lopsided, with at least 11 million people experiencing increased debt. The average debt built up by March 2021 was £25 billion according to StepChange, and about 4.3 million people are now behind on bills such as council tax, rent or fuel. Independent polling shows that 14 million people have suffered an income shock over the course of the pandemic, with almost half turning to crisis borrowing. Additionally, 9 million people had to borrow money in the last year to buy food and pay essential bills.
Andrew Selous
Con
South West Bedfordshire
Mr Selous discussed the root causes of unsustainable debt, including low income progression and unaffordable housing. He highlighted the importance of initiatives like the lifetime skills guarantee to improve job opportunities and advocated for zero energy homes as a solution to reduce utility costs. Mr Selous also emphasised the need for financial literacy and praised local charities providing support to those in debt.
Hayes and Harlington
The MP highlighted the Chancellor's complacency regarding the IFS report, which shows that 700,000 more children have fallen into poverty over eight years. He mentioned potential inflation of 4% by year-end and criticised regressive government policies like universal credit scrapping and council tax rise. The MP called for urgent action on a financial package to support tenants clearing rent arrears, regulation from the Financial Conduct Authority, and proposals such as capping interest rates and overdraft fees.
Robert Halfon
Con
Harlow
The current financial support mechanisms for households are insufficient. There is a need for more targeted assistance to prevent further debt accumulation among those who have lost their jobs due to the pandemic.
Nus Ghani
Con
Weaver Vale
I am concerned about the impact of household debt on low-income families. With the cost of living rising, many individuals are struggling to make ends meet and are falling into arrears.
Pat McFadden
Lab
Wolverhampton South East
Pat McFadden noted the impact of the pandemic on household finances, highlighting that while some income groups have seen savings increase, low-income households and the unemployed have faced significant financial strain. He cited data from the Institute for Fiscal Studies showing a rise in arrears among low-income households and StepChange reporting 11 million people with £25 billion in debt during the pandemic.
Patricia Gibson
SNP
North Ayrshire and Arran
Ms Gibson expressed concern about the rising number of people behind on basic bills such as rent, fuel or council tax, with 4.3 million people now in arrears and 2.8 million borrowing to meet their needs. She highlighted the poverty premium issue and called for capping interest rates on high-cost credit. She also discussed potential evictions due to rental arrears and advocated for long-term financial support from the Government, along with measures such as universal free school meals in Scotland.
Paul Maynard
Con
Bridgwater and West Somerset
Cited Auden Financial's 'Pandemic Penalty' report showing that over 50% of clients now have savings under £100, with single-parent families most likely to turn to short-term loans and food banks. The MP also highlighted the need for better signposting towards financial advice and the importance of specialist tax knowledge in verifying debts.
Salford
Rebecca Long-Bailey highlighted the exclusion of millions from Government support and noted that StepChange estimated 11 million people built up £25 billion in arrears and debt since the start of the pandemic. She advocated for grants to households to help clear rent debt and council tax arrears, maintaining the £20 uplift in universal credit, extending it to those on legacy benefits, providing an emergency grant for excluded individuals, fair debt write-downs, and exploring a debt jubilee for unrepayable debts.
Selaine Saxby
Con
North Devon
Discussed personal experiences with debt, highlighting the impact of the pandemic on constituents' finances. Emphasised the need for better financial education and more resources in debt management to help individuals and businesses recover from the restrictions imposed during the pandemic.
Simon Fell
Con
Barrow and Furness
The MP highlighted the divergence in household debt between those who have managed to cut costs and increase savings versus those struggling, particularly low-income households. He noted that some constituents have improved their homes while others are falling behind, indicating a need for continued support measures as we emerge from the pandemic.
Stella Creasy
Lab Co-op
Walthamstow
Ms. Creasy highlighted the severe impact of household debt on communities, especially renters and minority ethnic groups. She cited statistics showing that more than 19 million adults experienced income loss during the pandemic, with 11 million people amassing £25 billion in arrears due to necessity rather than discretionary spending. The speaker also noted a rise in use of high-cost credit products like 'buy now, pay later' and expressed concern over regulatory loopholes that allow these companies to evade proper oversight. She called for urgent regulation to protect consumers from predatory practices.
Government Response
John Glen
Government Response
Responded to the debate by outlining various Government initiatives aimed at supporting individuals dealing with household debt during and after the pandemic. Mentioned record funding of £96.4 million for free debt advice through the Money and Pensions Service, including Debt Relief Orders (DROs) with raised monetary limits. Announced a review of DRO fees and a consultation on personal insolvency frameworks to be launched soon. Highlighted the Breathing Space scheme providing lenders a 60-day pause on fees and payment requests for borrowers in financial difficulties. Discussed plans for a statutory debt repayment plan by 2024, no-interest loan schemes with up to £3.8 million funding, and increased access to credit union services. Also mentioned regulatory measures for buy-now, pay-later agreements.
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About Westminster Hall Debates
Westminster Hall debates are a chance for MPs to raise important issues affecting their constituents and get a response from a government minister. Unlike Prime Minister's Questions, these debates are more in-depth and collaborative. The MP who secured the debate speaks first, other MPs can contribute, and a minister responds with the government's position.