Data released this week by Citizens Advice paints a distressing picture for levels of household debt in the UK if the proposed cut to Universal Credit goes ahead at the end of September.
Universal Credit has been uprated by £20 per week during the pandemic, to help families relying on the benefit make ends meet. However, this lifeline is set to be cut at the end of September – a move which Citizens Advice suggest that the cut could drive up to 2.3 million people into debt. For those who were just about managing with the current rate, or those families already struggling to make ends meet, this is a potentially devastating cut which will force many to take on debts.
The survey of over 2000 people shows that more than a third of claimants would be pushed into debt just by paying their essential bills if the cut goes ahead. This figure rises to nearly half of people on Universal Credit in so-called ‘Red Wall’ areas.
Coupled with the effects of rising energy bills and potential redundancies as the furlough scheme winds up, many frontline debt advice services are bracing for a huge surge in need this winter.
Many of those who will be pushed into debt aren’t people who were able to make ends meet on Universal Credit before the uplift was introduced. In December 2019, 2.7 million households were claiming UC – whereas in May 2021, this had increased to 5 million. For many households, the end of the uplift doesn’t represent a return to ‘normal’: it represents a major cut to their income to a rate not previously experienced.
Millions could be plunged into debt by the cut. But even this figure doesn’t take into account the 11 million who have built up £25bn of debt and arrears since the pandemic began, many of whom will be burdened with long-term debt issues for many years to come.
Now is not the time to cut the lifeline. The economic effects of the pandemic are still being felt all around the country, and the decreased rate of Universal Credit will push millions into debt. If we want to Build Back Better, we need to give families a stable platform from which to face the future – not a cut to income and increased debt.
But it’s not just about ensuring income adequacy. We need a bigger solution to the debt crisis facing families all around the UK, for those who will be newly in debt after the cut and for those who are already facing long-term debt crises. We’re calling for a debt jubilee, to give families weighed down by debt a new start and a stable platform from which to face the future. Will you join us?