Covid-19 crisis: Chancellor – we need a debt freeze

Below is an open letter to the Chancellor, Rishi Sunak, authored by the Jubilee Debt Campaign and signed by CLES CEO Neil McInroy alongside nearly 80 other charities, campaign groups, trade unions and academics. The letter warns that millions of low-income households face a “deepening debt trap” that will be impossible to climb out of without government intervention. Coverage of the letter appeared in The Financial Times on Thursday 2nd April 2020.

Dear Chancellor,

We, the undersigned leaders of civil society organisations, trade unions and community groups, academics, and policy experts call on you to take urgent and immediate action to prevent the COVID-19 pandemic deepening the debt trap faced by millions of low income households, and pushing millions more into problem debt.

The UK already faced a profound and growing crisis of poverty, destitution and problem indebtedness prior to Covid-19.

Over 14 million British citizens, nearly 20% of our entire population, were already in poverty: struggling to afford even basic living essentials like food, water, electricity and rent. Growing numbers have been forced to borrow from high-cost lenders just to put food on the table, and faced spiralling indebtedness as a result. Personal debt was at its highest ever level just prior to the Covid-19 outbreak, with over 9 million people in problem debt.

We strongly commend the action you have taken within the last week to protect incomes and prevent the pandemic leading to employers laying off workers. We particularly applaud the moves to guarantee wages through the job retention scheme and to uplift Universal Credit and Local Housing Allowance.

However, many thousands of layoffs have already happened despite the measures announced, with many more expected in the coming weeks. Even with the actions you have announced so far, our social safety net will be severely inadequate to support those who lose their work and incomes because of this crisis, as well as those already out of work or unable to work for health or other reasons, all of whom now face increased living costs because of Covid-19.

Statutory Sick Pay is at an unliveable rate of £12.50 per day.

A decade of real cuts means that other unemployment and social security benefits are similarly not enough to live on, worth less today in real terms than they were in the 1990s. Across the board, from Universal Credit to Carers’ Allowance, our social security provisions are insufficient to meet basic living costs, pushing those who rely on them into poverty, or debt, or both.

This crisis highlights the wholesale inadequacy of our social safety net and its inability to provide for the welfare of citizens and the nation as a whole at a time of national crisis. It is incumbent on the government to urgently move to provide a liveable income guarantee for all, including the homeless and people with no previous recourse to public funds, removing all punitive sanctions and payment delays. Self-isolation from Covid-19 simply cannot be a privilege only some can afford.

However, even with further action, these delays and gaps in the Government’s support package mean millions are already facing a dramatic drop in their incomes.

Given the existing debt overhang, a more comprehensive household debt write-off will be needed in the post-Covid period, to give families and the economy a fresh start. In the meantime, to prevent the further build-up of unfair and unsustainable household debt, we call on the government to:

1. Freeze repayments on all unsecured debt (including loans, credit cards, and rent-to-own finance), with no accrual of interest during the repayment holiday

Those facing redundancy, loss of wages or other payment difficulties because of Covid-19 must be entitled to an immediate freeze on unsecured debt payments, similar to the mortgage holiday extended to homeowners, with no interest accumulated during the repayment holiday and no impairment of credit records.

2. Freeze utility, rent and council tax payments, with no build-up of arrears

More help must also be made available to impacted households in respect of council tax, rent and utility bills for those who need it, to ensure there is no build-up of arrears on these accounts. Central government should:

• Fund local authorities to provide 100% Council Tax Support to impacted households;
• Require landlords accessing mortgage holidays to pass that holiday onto tenants;
• Fund local authorities to make additional discretionary housing payments where rents are still required and cannot be paid;
• Provide help with gas and electricity costs by, for example, by broadening the scope and assistance provided through the Warm Home Discount Scheme.

3. Write-off council tax and social security debts

We welcome your move in the Budget to ease the burden on households of unfair council tax debt. In the face of Covid-19, it is essential to go further and provide breathing space to households under pressure by writing off the council tax debt and debt for overpayments of child benefit, working tax credit and Universal Credit: debts which, in a vast majority of cases, households have not intended to incur and which thousands are struggling to repay. Again, there should be full reimbursement to local councils by the government for resulting revenue losses.

4. Suspend all debt collection and enforcement activity with immediate effect

Broadening the Government’s pledge to protect renters by suspending all evictions, we call on the Government to suspend all collection activity on household debts and all enforcement activity by bailiffs, enforcement agents, and others. Without this package of measures, the economic recovery from Covid-19 will be severely suppressed and millions more households will be pushed into the poverty, destitution and indignity of the growing household debt trap.

We call on you urgently to act.

Yours Sincerely,

Neil McInroy – Chief Executive, Centre for Local Economic Strategies

Dr. Alexander Guschanski – Lecturer in Economics, University of Greenwich

Dr Andreas Antoniades – Senior Lecturer in Global Political Economy, University of Sussex

Andrew Jackson – Research Fellow, Centre for the Understanding of Sustainable Prosperity, University of Surrey

Andrew Denis – Fellow Emeritus, Department of Economics, City, University of London

Ann Pettifor – Director, Policy Research in Macroeconomics

Anna Laycock – Chief Executive Officer, Finance Innovation Lab

Anna Vickerstaff – UK Team Leader, 350.org

Anne Funnemark – Campaign Director, Jubilee Scotland

Asad Rehman – Executive Director, War on Want

Beth Redmond – Organiser, Tenants Union UK

Dr Bruno Bonizzi – Senior Lecturer in Finance, University of Hertfordshire

Caroline Molloy – Editor, Open Democracy UK

Dr Christopher Harker – Associate Professor, Institute for Global Prosperity, University College London

Dan Wilson Craw – Director, Generation Rent

Dr David Harvie – Associate Professor of Finance and Political Economy, University of Leicester

Damon Gibbons – Director, Centre for Responsible Credit

Dr Daniel Ozarow, Chair – Jubilee Debt Campaign Academic Advisory Network

Debbie Webster – Manager, St Anns Advice Group and the Chase Neighbourhood Centre, Nottingham

Professor Deborah James – Department of Anthropology, University of Bristol

Dr Deborah Potts – Emeritus Reader in Human Geography, King’s College London

Dr Dianna Smith, Lecturer, School of Geography & Environmental Science, University of Southampton

Fanny Malinen – Director, Research for Action

Fran Boait – Executive Director, Positive Money

Dr Hilary Powell – Co-Director, Bank Job / Optimistic Foundation CIC

Professor Hulya Dagdeviren – Professor of Economic Development, University of Hertfordshire

Ian Hodson – National President, Bakers’, Food & Allied Workers Union

Imogen Richmond-Bishop – Coordinator, Right to Food project

Irene Audain MBE – Chief Executive Scottish Out of School Care Network

Isaac Rose – Coordinator, Greater Manchester Housing Action

Jamie Burton – Chair, Just Fair

Professor Jan Toporowski – Department of Economics, SOAS University of London

Dr Jason Hickel – FRSA & Senior Lecturer, Goldsmiths, University of London

Dr Jeff Powell – Senior Lecturer in Economics, Faculty of Business, University of Greenwich

Dr Jo Michell – Associate Professor of Economics, University of West England

Joel Benjamin – Debt Resistance UK

Professor John Holmwood – School of Sociology and Social Policy, University of Nottingham

Joseph Howes – Chief Executive Officer, Buttle UK – For Children and Young People

Dr Joseph Spooner – Associate Professor, Department of Law, London School of Economics

Dr Johnna Montgomerie – Head of the Department of European & International Studies &

Reader in International Political Economy, Kings College London

Judith Moran – Director, Quaker Social Action

Dr Kate Bayliss – Senior Research Fellow, Centre for Development Policy and Research

(CDPR), School of Oriental and African Studies

Kevin Courtney – Joint General Secretary, National Education Union

Professor Laura Bear – Head of Anthropology, London School of Economics

Laura Payne – Project Manager, 4in10: London’s Child Poverty Network

Laurie Macfarlane – Fellow, Institute for Innovation and Public Purpose, University College London

Luke Hildyard – Director, High Pay Centre

Maia Kelly, Coordinator, Leeds Tidal

Manuel Cortes – General Secretary of the Transport Salaried Staffs’ Association

Martin Charlesworth – Chief Executive, Jubilee+

Dr Mary Bousted – Joint General Secretary, National Education Union

Mathew Lawrence – Director, Common Wealth

Miatta Fahnbulleh – Chief Executive, New Economics Foundation

Michael Deas – Coordinator, London Renters Union

Neal Lawson – Executive Director, Compass

Dr Neil Lancastle – Senior Lecturer, Leicester Castle Business School, De Montfort University

Nick Dearden – Director, Global Justice Now

Professor Ozlem Onaran – Director of Greenwich Political Economy Research Centre,

University of Greenwich

Paddy Lillis – General Secretary, Union of Shop, Distributive and Allied Workers

Paul Parker – Recording Clerk, Quakers in Britain

Dr Robert Biel – Associate Professor, Development Planning Unit, University College London

Dr Robert Calvert Jump – Research Fellow in Political Economy, University of Greenwich

Robert Palmer – Executive Director, Tax Justice UK

Professor Roberto Veneziani – School of Economics and Finance, Queen Mary University of London

Ronnie Draper – General Secretary, Bakers’ Food & Allied Workers’ Union

Dr Ryan Davey – Social anthropologist, University of Bristol

Sabine Goodwin – Coordinator, Independent Food Aid Network

Samira Johnson – Co-ordinator, Unfair Debt Group

Sara Williams – Debt Camel

Sarah-Jayne Clifton – Director, Jubilee Debt Campaign

Dr Shaun French – Associate Professor of Economic Geography, University of Nottingham, and Nottingham Financial Resilience Partnership

Dr Simon Mair – Research Fellow, Centre for the Understanding of Sustainable Prosperity, University of Surrey

Professor Steve Keen – Honorary Professor of Economics, UCL & ISRS Distinguished Research Fellow

Stuart Melvin – Co-Founder, Workforce Movement & the Coronavirus Support Group for Workers

Professor Terrence McDonough – Emeritus Professor of Economics, National University of Ireland Galway

Tracey Herrington – Project Manager, Thrive Teesside

Dr Wanda Wyporska – Executive Director, The Equality Trust

Professor Wendy Olsen – Professor of Socio-Economics & Head of Department of Social

Statistics, University of Manchester

Will Stronge – Director, Autonomy