Britain is “sleepwalking into a debt crisis” after a steep rise in emergency borrowing by low- and middle-income households to cope with the Covid-19 jobs crisis.
Household borrowing and arrears linked to the coronavirus pandemic have soared 66% since May to £10.3bn. The number of people who are in severe debt has risen to 1.2 million – nearly doubling since March – with a further 3 million people at risk of falling into arrears after taking on extra short-term loans.
Phil Andrew, the debt charity Stepchange chief executive, said: “This report paints a picture of a nation sleepwalking into a debt crisis..." Andrew said: “This winter, a second national lockdown will drive unemployment, reduced hours and rising energy bills... there is a real danger of lasting economic and social damage that will deepen inequality..."
Official figures showthe number of people made redundant rising steeply, and many are concerned the pandemic has devastated the finances of many vulnerable households.
A report last month by a parliamentary committee laid part of the blame on the the universal credit (UC) system, which it said pushed many families into the arms of payday lenders because initial payments take five weeks to arrive.
Research in the summer by the Joseph Rowntree Foundation and Save the Children found nearly two-thirds of hard-pressed families on UC borrowed money to stay afloat. It found 70% of families had cut back on food and other essentials, while half had fallen behind on rent or other household bills.