Pandemic plunges 18 million Brits into debt
One in three people have got into debt since the start of the pandemic, according to a new report by national poverty charity, Turn2us.
The findings also reveal how families with three or more children are twice as likely to run out of money as families with only one child.
The report, which was co-designed with those who have experience of struggling with money, explores the scale and impact of the coronavirus on financial resilience.
What is the scale of debt?
- One in three people (34%) have had to use some form of debt to get by since March 2020, with 6.4 million (12%) people using multiple forms of debt, such as a credit cards, overdrafts and loans.
- Additionally, more than one in ten people (12%) have resorted to missing a bill or debt repayment since March. Before the pandemic only 3% of people were falling behind with credit payments.
- Half of all people furloughed since March have had to use forms of debt, compared to just 23% of people who have seen no change to their employment.
How often do you run out of money?
- More than one in five of us (11 million people) are now running out of money ‘always’ or ‘most of the time’ before the end of the week or month – this is an additional 4.2 million since March.
- Employees are now twice as likely to frequently run out of money as they were pre-Covid-19 and self-employed workers now 2.5 times more likely.
- More than eight million workers are also currently only able to cope financially for less than a month if they lose their main source of income.
Who else is affected?
- 40% of 18-24-year olds have frequently run out of money in the past year, compared to only 8% of people over the age of 55.
- A third of people with a disability (33%) run out of money frequently (‘Always’ or ‘Most of the time’), compared to only 18% of people without a disability.
- While over a third of people from both Asian and Black ethnic backgrounds frequently run out of money (34%, 36%), only a fifth of people from white ethnic backgrounds experience frequently running out of money (21%).
- Nearly a third of women (32%) could also only last a month or less if they lost their main source of income, compared to a quarter of men (25%).
- Only 26% of Universal Credit claimants have hardly ever or never run out of money before the end of the week or month within the last year, compared to 72% of people who aren’t claiming income related benefits.
What should we do?
- Maintain the £20 per week uplift to Universal Credit to stop at least 700,000 people from being plunged into poverty
- End the five-week wait for Universal Credit so people can avoid falling further into debt
- Increase funding and guidance for Local Welfare Assistance schemes – so that people don’t have to rely on foodbanks
- Increase support for children through the benefits system to reduce the high numbers of children growing up in poverty
- Increase support for people with disabilities and apply the £20 uplift to legacy benefits to reduce the high proportion of families with a disabled family member living in poverty
Thomas Lawson, Chief Executive at Turn2us, said: “The Covid pandemic has had a profound impact on people across the UK. Households are losing their jobs, falling into debt and fighting off the risk of hunger and homelessness.”
“While many who were just about managing before the pandemic are now struggling day-to-day, certain groups have faced a clear and disproportionate affect; women, people with disabilities, larger families, Black and Asian people and those from other minoritized groups and younger people.
“What is clear now is that financial resilience is at an all time low. Even if a vaccine for Covid-19 becomes available tomorrow, the damage has been done to people’s finances. People have spent their savings and used up their rainy day funds, there is nothing left.
“The government must act to keep people above water. If people can’t last two weeks without a paycheque, how are they going to last five weeks waiting for Universal Credit? The DWP must build on the existing support schemes and create a long term strategy to support people as this crisis rolls on. We cannot become a nation in which we all survive on credit.