Excess debts - who has fallen behind on their household bills due to coronavirus?
Overall, we estimate that 6 million UK adults have fallen behind on at least one household bill during the pandemic
- 3.4 million on their mobile phone or broadband bills
- 3 million on their water bills
- 2.8 million on their energy bills
- 2.8 million on their council tax
- 1.2 million on their rent
People who are more likely to have been directly affected by coronavirus, to have played a key role in the response, or to have already been in a precarious financial situation beforehand are far more likely to have fallen behind on their bills.
Coronavirus has pushed many people into debt that will take them years to get out of. We estimate that it would take an average person that we help with debt problems at least 30 months to pay back just their priority debts, assuming that they spent their entire disposable income on repayments each month.
Coronavirus debts have implications for the economy as a whole
Without targeted support, high levels of debt will reduce consumer spending and could dampen the economic recovery - every pound spent on debt repayments is a pound not spent consuming goods and services. Moreover, many creditors - including landlords, local authorities, and essential service providers - are likely to face high levels of bad debt resulting in higher costs for consumers and bill payers.
Government must step in with financial help for coronavirus debts
Without help, many households will be trapped in unfair, unaffordable debt for years to come. The exact mechanism for such relief will vary across sectors, but should be approached with the following principles in mind:
- Financial support should be offered across sectors.
- Financial support should be offered as a one-off intervention to help deal with debts built up due to coronavirus.
- Help should be targeted at those who have borne the brunt of the financial impact of coronavirus.
- The costs of relief should be shared between the government, creditors, and individuals.
Help could include mechanisms, such as funding for local authorities to support people behind on council tax due to coronavirus, loans and grants for landlords and tenants to make up rent arrears and help people stay in their homes, and new guidance for banks to reschedule and provide relief for unaffordable lockdown debts.