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How a pandemic changed the landscape of debt

calendar26 October 2020

Kiri Saunders's avatar Kiri Saunders

How a pandemic changed the landscape of debt

We’ve been talking about COVID-19 all year. In that time we’ve coined some new phrases like social distancing, self-isolation and support bubbles. We’ve gained a new appreciation for aisles full of toilet roll and we all know someone who’s made a loaf of sourdough. Some of us have experienced a slower pace of life, whether it’s reduced social calendars or not having to commute into work. Others have been rushed off their feet, such as our key workers or those trying to juggle work and home schooling. Some have been able to save more, or pay off that credit card, whereas others have struggled to get by on an 80% wage, or really felt the extra costs of being at home all the time.

It’s interesting that our collective experience of the pandemic has been both unifying and polarising.

At CAP, we are watching this pandemic shift the debt landscape. Those able to work from home and earn a full wage during lockdown also had fewer opportunities to spend. No more money spent on commuting or eating out. Bank of England statistics showed that £7.4bn of consumer credit was repaid in April 2020, the largest net repayment since records began in 1993. Figures from the Office of National Statistics (ONS) revealed that people saved 8.6% of their income in the first three months of 2020, more than the 5.4% of savings made in the same period in 2019.

Sounds like good news, right?

Wrong. Sadly, this isn’t the experience for everyone. Some groups in society, such as the under-30s and those on low incomes, have been hit hard by the pandemic. This is because many work in sectors impacted by COVID-19 restrictions. According to the Resolution Foundation, low income households were twice as likely as richer ones to have increased their debts during the crisis.

At CAP, we know how the impact of debt spans across the social, physical and financial spheres of life. Problem debt can have a real impact on living standards, with many clients telling us that before seeking support from CAP Debt Help they would frequently go without food, heat or light.

Sadly, the UK is seeing more households starting to struggle to afford these daily essentials because of COVID-19. According to a YouGov report, of those who consider themselves financially distressed, 37% say they’ve eaten less than normal, and 31% have reduced the number of showers or baths they’re taking. Here at CAP, many clients have felt the impact of increased household bills. Others have struggled with being put on reduced hours, with one client saying, 'I’ve had about £400 decrease in wages – I can’t pay into my CAP Plan anymore. Also, not having the money to go shopping or get stuff I need’.

On one hand, the pandemic is causing the rich to get richer, giving people the chance to save more money and pay off their debt. On the other hand, the pandemic is leaving those already struggling on low incomes to deal with unavoidable income shocks.

We’ve seen something similar to this before. After the 2008 financial crisis, we started to hear more about the growing number of people needing to use foodbanks. As a nation we became more aware of UK poverty, seeing the growing economic divide between the wealthy and those on low incomes. Today’s financial crisis is no different; some people will be hit hard whilst others will profit.

That is why Christians Against Poverty (CAP) is going to be needed more than ever.

We are working tirelessly to ensure we can help as many people as possible. We are gearing up in anticipation of the many more households falling into problem debt because of COVID-19. At the same time, we are working with the Government and creditors, to help them understand the impact that COVID-19 is having on some of the UK’s lowest income households. We are campaigning for changes that would make a real difference to our clients, such as keeping the £20 Universal Credit uplift.

CAP’s heart is to not only help people with their financial circumstances, but also to share the love of Jesus. We are here to bring the good news to people in isolation, people struggling with mental health challenges, those facing relationship breakdown or experiencing joblessness. We are here to bring hope to those who feel as though there’s no way out, because even in the most testing of times, with God by our side, there is always hope.

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