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Briefing
Cost of living
Savings, debt and assets

Dragged down by debt: Millions of low-income households pulled under by arrears while living costs rise

This new research highlights that low-income households, who have borne the financial brunt of the pandemic so far, are also being dragged down by debt as we look to our economic recovery.

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We find that 3.8 million low-income households across the UK are in arrears, and 4.4 million have had to take on new or increased borrowing through the pandemic. Many of these households weren’t in arrears before the pandemic, and have faced income loss and increases in their expenses.

We are calling on the Government to do the right thing and release these households from the burden of arrears by reinstating the Universal Credit lifeline, providing grant funding for targeted debt relief, and addressing key drivers of debt through system reform.

Recommendations:

  • Reinstating the Universal Credit £20 Lifeline to help prevent low-income households accruing more unmanageable debt.
  • Providing grant funding for targeted debt relief: Government should at least double the Household Support Fund to equip local councils and debt support organisations to provide targeted relief to low-income households facing unmanageable and unaffordable debts accrued during the pandemic.
  • Addressing the drivers of debt through systemic reforms, through preventing low-income households from accruing debt as soon as they claim Universal Credit and writing off historic tax credit debt.

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This briefing is part of the cost of living topic.

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