Nearly two thirds of families on Universal Credit forced into lockdown debt ‘nightmare’

New research by JRF and Save the Children reveals that nearly two thirds of hard-pressed families on Universal Credit are borrowing money to stay afloat during the Covid-19 emergency, as the organisations call for an urgent £20 a week increase to the Child Element of Universal Credit and Child Tax Credit

  • Large-scale survey of families finds six in 10 families on Universal Credit and Child Tax Credits have been forced to borrow money since start of crisis – with many relying on payday loans or credit cards
  • To support up to 4 million families and 8 million children, JRF and Save the Children call on government to extend an urgent lifeline for families in the form of a £20 a week increase to the Child Element of Universal Credit and Child Tax Credit
  • 70% of families have had to cut back on food and other essentials, while half have fallen behind on rent or other household bills, sparking fears of more hardship ahead if unemployment rises further

Nearly two thirds of hard-pressed families on Universal Credit are borrowing money to stay afloat during the Covid-19 emergency, new research by the Joseph Rowntree Foundation (JRF) and Save the Children reveals.

The survey found 86 per cent of those with children on Universal Credit or Child Tax Credits have faced extra household costs owing to the pandemic. Half of all those surveyed say they are behind on rent or other essential bills.

Income losses and the additional costs of lockdown have put increased pressure on already overstretched family budgets: 70% of families surveyed said they have had to cut back on food and other essentials, while 60% of families on Universal Credit or Child Tax Credit have been forced to borrow money including using payday loans or credit cards.

Struggling to put food on the table or money on the electricity meter is having a negative impact on parents’ mental health: two-thirds of those surveyed reported that concerns about money had affected their mental health with around a quarter reporting a severe impact.

Parents with children who were caught in poverty pre-crisis are around 50% more likely to have lost their jobs than parents who were better off, and the long-term effects on childhood and family life could be significant.

Barbara and her husband Harry, who have one daughter and care full-time for their 11-year-old grandson, started receiving Universal Credit after Harry fell ill with Coronavirus and was unable to work.

“Financially, it’s just a nightmare. After the bills are paid and you’ve got the food in, there’s just no money left. There’s just no money,” Barbara said.

“You’re getting people calling and asking why your bills haven’t been paid, and you just don’t have the money. It’s stressful when you’ve gone years and years always paying your bills, and then all of a sudden you can’t pay them.

“It’s the children that suffer. There are certain basics that children need, and if they need a new pair of shoes or something it means taking out a loan – and then you’re getting deeper into debt.”

Save the Children and JRF are calling for an urgent, temporary lifeline for families in the form of a £20 per week increase to the child element of Universal Credit and Child Tax Credit, to minimise the long-term impact of the crisis on children. This is equivalent to £2.85 per child, per day: enough to cover a child’s breakfast and lunch or to buy books and toys so children can play and learn.

Modelling by JRF shows that this would help keep up to 4 million families afloat and provide direct support for 8 million children.

Helen Barnard, Acting Director of the independent Joseph Rowntree Foundation said:

“The coronavirus crisis has shown us that as a compassionate society we want to support each other and protect each other from harm. As well as individuals performing extraordinary acts of public service, we have also seen the government intervening to protect jobs and to boost social security as a lifeline for millions of families.

“It’s vital that we build on this to ensure that the pressures on families with children in particular are recognised and acted on. Families are dealing with high costs with children at home and many simply haven’t got the income they need to weather the storm. This is taking a major toll on parents’ mental and physical health and damaging family life during an intense period for everyone.

“Providing an urgent uplift of £20 per week to families with children claiming Universal Credit or Child Tax Credits can keep many from being pulled into poverty, especially where parents have lost work as a result of the pandemic.

“By taking action now, we can ensure that the human suffering of this tragic pandemic is not compounded by rising child poverty, damaging life chances and holding a generation back in the years to come.”

Dan Paskins, Director of UK Impact at Save the Children, said:

“Life at the moment is especially hard for families forced to make impossible choices about whether to put food on the table or money in the electricity meter. A £20 a week increase will give families with children the lifeline they need to pull them through these difficult times.

“Every child should have the toys and books they need to learn and play. They shouldn’t have to worry because their parents are struggling with low pay, insufficient benefits, fear of losing their job, debt and rising costs.”

The Department for Work and Pensions (DWP) has received more than 2.3 million new applications from families for Universal Credit since the beginning of the crisis. Prior to the crisis, 2.6 million families were on Universal Credit, of which almost 1.2 million were families with children.