Hidden impact of crippling debt in coronavirus crisis

Daily death counts and the effects of lockdown have been making headlines all year, but there is growing concern about a hidden impact which is hitting families all over the country – debt.

The economic disaster caused by the pandemic has, of course, been widely documented. Millions have been furloughed from work, while many have lost their jobs altogether.

But when the number affected is so huge and the impact so widespread, the individual stories of those people struggling to keep their heads above water often get drowned out by the noise.

'Alarming statistics'

Alarming statistics have been emerging about the scale of the debt crisis.

There are fears about what will happen to families when emergency Government protections disappear. The Treasury has stepped in to try to prevent evictions during the pandemic, while councils have also offered rent and council tax breaks for the worst off.

But furlough and other emergency measures can only last so long, as Chancellor Rishi Sunak has made clear.

The debt charity Step Change says struggling households "face a cliff edge when temporary protections against eviction and enforcement action expire".

It says the average household is £1,076 in arrears and has £997 worth of debt, while since the start of the coronavirus crisis 2.8 million people have fallen into arrears as they struggle to keep up with their bills.

Naturally, those earning the lowest have been hardest hit. A total of 44 per cent of those affected with an income of less than £30,000 have fallen behind or borrowed to make ends meet compared to 25 per cent of those with an income of £50-to-60,000, Step Change says.

And the issue is of particular concern in the Black Country, home to some families who are struggling the most.

According to the Just Finance Foundation, the West Midlands has the third highest level of debt of any region in the UK at 18 per cent. All four Black Country authorities are in the top eight for debt in West Midlands.

The borough of Sandwell has the "most over-indebtedness" in the UK at 24.7 per cent – 8.6 per cent above the national average. The other areas aren't far behind, with Wolverhampton on 21 per cent, Walsall on 20.6 per cent and Dudley 18.1 per cent.

Sandwell Council said it had helped more than 5,000 residents with their finances during the pandemic, and those whose income had been affected claim more than £11 million in benefits.

Council interim leader Councillor Maria Crompton added: "These are still difficult times and we will do everything we can to support the residents of Sandwell and offer financial help and advice to those who need it."

'Potentially one crisis away from catastrophe'

A recent report revealed 55 per cent of adults living in the West Midlands have less than £100 in savings, meaning most are living hand to mouth and are potentially one crisis away from catastrophe. And for many that crisis has arrived.

Support services in the Black Country have reported a sharp rise in calls from people struggling with debt and taking advantage of food banks in order to feed their families.

The free debt counselling service Oldbury Christians Against Poverty (CAP) has been forced to expand in order to cope with the rising number of people seeking help.

The Oldbury CAP Debt Centre, which launched in 2015 at King’s Community Church, has appointed a new debt coach after seeing an increase in demand for their services. The centre aims to continue working with people until they become debt free, creating a budget plan and providing ongoing support.

Manager Sarah Jordan said: “It has been such a frustration to have a waiting list, particularly as many of our clients are vulnerable and need help straight away. So, it’s great to be able to offer more support for local people.

“Our help is free. If you know things are out of control and you’re stressed, missing meals or oversleeping, please give us a call and let us help you get your life back on track.”

If the country thought it had moved on from stories of food banks and homelessness following the recession, the pandemic has brought them rushing back, effectively wiping out a decade of economic progress.

Step Change has called on the Government to ensure there are "strong protections against housing insecurity and unaffordable repayment demands, grants to address debts accumulated to pay for essentials during the crisis and investment and reforms to the social safety net to help struggling households recover".

Experts fear struggling families could now fall prey to loan sharks, while others bury their heads in the sand, ignoring the problem and hoping it will go away.

James Henderson is a senior development worker at Transforming Communities Together, which works closely with Just Finance Foundation and provides financial education courses to point people with money worries towards to right support services. he said it was crucial that those in trouble reach out for help and don't ignore the problem.

He said: "I totally understand how difficult it is to talk about money. Sadly, there is a real stigma around that. We would absolutely recommend people talk about it and get that help early."

'Seek support'

Mr Henderson added the reality of the pandemic meant many families would be facing difficult times. He urged as many as possible to seek support.

He said: "It's a really worrying time for so many people with changes to furlough and people starting to come back to work. Many people will be worrying if they will have a job to go back to. Even if they have been furloughed they have only had 80 per cent of their pay, unless it's been topped up by their employer.

"Lots will be experiencing financial worries at this time and it's so important to talk about it and get help.

"We want everybody to know it's okay to talk about finances, that many people are struggling and you are not on your own. It's an old adage but a problem shared is a problem halved."

Mr Henderson is aware of the potentially dark consequences that can be associated with debt, and not taking action early on.

He said: "We know there is a big correlation between money worries and poor mental health.

"If you think of money, it's such an important thing. All your hopes, plans and dreams tend to revolve around money. It affects every part of your life. If you are not able to eat it can affect your physical health, if you are not able to go out it can affect your mental health.

"I think it's something many people are worried about. It's just important to talk about it because help is out there."

Dudley Council leader Councillor Patrick Harley said: "We are fully aware as a council that the coronavirus pandemic is having a massive effect on people in the borough, both on their health and on their finances.

“We want to give all the help we can to people in the borough who, through no fault of their own, have seen their financial circumstances change as a direct result of the coronavirus outbreak.

"In May we reduced council tax bills for more than 17,000 residents, cutting their bills by up to £150. We also allowed all residents to defer payments in April and May when the pandemic was at its peak.

“We have handed out more than £100m so far to support businesses, and we will continue to do everything in our power to assist residents to come through this difficult and unprecedented period.”