The Budget’s out – but there’s little relief for millions in debt

New government funding for people in debt will bring some relief this winter, but the measures do not match the scale of the household debt crisis engulfing the UK.

Over the last month the UK government has announced two separate funding packages for local authorities, making support available to households struggling with rent arrears, utility bills and Council Tax. The second of which was announced as part of a package of policies around this week’s Autumn Budget.

This is significant because the announcements imply that the government have finally accepted that it has a role to play in tackling the build-up of household debt in our communities. We should mark this as an important step forward in the campaign, but the funds by themselves don’t add up to a serious plan to tackle the worsening debt crisis.

Over the course of the pandemic, we’ve been campaigning alongside allies at Reset the Debt and others for debt write-offs and grants for households. The support available through the Household Support Fund and the package for ‘vulnerable renters’ is welcome, but it’s not enough to enable everyone weighed down by debt to rebuild their lives. Just last week, the Joseph Rowntree Foundation published a report revealing that 3.8m households on low incomes are behind with bills. Crisis currently estimate that almost a million households across the UK are in rent arrears.

Grants will now be administered in the form of discretionary payments through local authorities, whilst we have been calling for support to be given to all that meet nationally agreed criteria. Local authorities will have to ration the £500 million Household Support Fund, which is designed to meet daily needs such as food, clothing and utilities. The fund can only be used for rent arrears in exceptional circumstances.

The Covid Local Support Grant was a similar scheme that distributed £229 million between December 2020 and mid-April 2021 before Universal Credit was cut by £20 per week and the latest cost of living increases hit. Almost 6.3 million payments were made to ‘vulnerable households’, which averages out at just £36 per payment (before administration costs).

During the pandemic, Citizen’s Advice calculated that people seeking their support owed an average of £900 in rent arrears and £761 in Council Tax. Based on these averages the £500 million Household Support Fund would only clear the debts of around 300,000 people, a fraction of the 8.5 million people now missing payments or experiencing their debts as a heavy burden in their lives.

When it comes to the support for vulnerable renters, the £65 million fund falls far short of the estimated £360m rent debt backlog built up over the course of the pandemic. Around half a million private renters are in rent arrears and local authorities have more direct links to those in local authority housing, so we are yet to see how much of the fund reaches private renters who have been hit hard by the pandemic.

Alongside advocating for solutions that lift people out of problem debt, we campaign to tackle the root causes – low pay, insecure work and inadequate social security. This week’s Autumn Budget was a key opportunity to confront the household debt crisis head on and again it contained some positive announcements but was lacking in urgency and ambition.

The Chancellor confirmed that the main minimum wage rate for people aged 23 and over will rise by 6.6%. This is important, but more must be done to guarantee a real living wage for all and proper pay rises across the board, after more than a decade of pay stagnation. In their analysis, the Institute For Fiscal Studies noted soberly that “large swathes of the population face a squeeze on living standards over the coming year.”

Sadly, there was also nothing in the budget around security of work and income. More steady and predictable income through rights to guaranteed working hours and decent sick pay are vitally important in preventing households from falling into debt.

It was also announced at the budget that the government will increase the Universal Credit work allowance, the threshold under which earned income begins to affect the payment. The ‘taper rate’, the amount of benefit withdrawn for every pound earned, will also be reduced, meaning that people in work will be able to keep more of the income they earn whilst claiming the benefit. However, it won’t undo the harm done from cutting the entitlement by £20 per week, and people who are out of work or can’t work will see no benefit from these reforms.

The campaign for debt justice in the UK is building momentum but the systemic inequalities that existed before the pandemic have worsened, with key workers, carers, parents, women, renters, people with disabilities and black and minority ethnic households more likely to have been pushed into debt.

We will be actively building the power of the UK debtors movement over the coming months and years, taking collective action and building solidarity to win the changes we need.

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