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Over two thirds of Universal Credit claimants currently in arrears while living costs rise

26 October 2021

Low-income households, who have borne the financial brunt of the pandemic so far, are also being dragged down by debt, according to new research by the Joseph Rowntree Foundation (JRF).

It finds 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.

One of the groups most likely to be in arrears and struggling with household finances are Universal Credit claimants.

JRF says:

“This group has been hard hit through the pandemic, and over two thirds are currently in arrears. This research was carried out just as Universal Credit was being cut and the Government was talking about a shift to a high wage, high employment economy as the solution to the income loss.

However, our polling found that 50% of Universal Credit recipients said they did not feel confident they could find a job or work more hours.

It adds that:

“This group also aren’t confident they will be able to pay their bills and avoid further debt: 40% are not confident they will be able to pay their bills in full and on time, while 35% aren’t confident they will be able to avoid taking on more debt.

More than half of these families (53%) don’t think they will be able to build up any savings at all before the end of the year. Instead, around half are planning to cut back on essentials like food – but they will be facing inflationary pressures at the same time, alongside an energy crisis, which will be pushing up bills.”

JRF recommends that the Government:

Reinstate the £20 lifeline to Universal Credit and Working Tax Credit and extend it to people on legacy benefits - to help low-income households pay off pandemic arrears and limit the accrual of further unaffordable debt, especially as cost-of-living pressures increase.  

At least double the recently announced Household Support Fund - and give it an explicit focus to enable local councils and debt support organisations to provide targeted relief to low-income households facing unmanageable and unaffordable debts accrued during the pandemic. 

Address 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.  

In addition, the Government should:

  • address social security adequacy to help more people avoid getting into debt;
  • redesign Universal Credit deductions with people with experience of them, so they cause less hardship;
  • implement best practice across state debt collection; and
  • ensure that when people need it, they have easy access to affordable credit alongside debt and insolvency support.

JRF concludes that:

“As we head into the winter, with a looming cost of living crisis on the horizon, our polling paints a deeply concerning picture of low-income households struggling to keep their heads above water, juggling multiple debts and deepening arrears.

Now is the time for the Government to take urgent action to support families at risk of being pulled under by debt so they can move into the recovery with a genuinely fresh start.”  

Ken Butler DR UK’s Welfare Rights and Policy Officer said:

“The end of the £20 uplift and the exclusion of legacy benefits from it has  already been highlighted in numerous other research reports.

The DBC September 2021 Pandemic Poverty report highlighted that two thirds of Disabled claimants have had to go without essential items at some point during the pandemic; and almost half of Disabled claimants reported being unable to meet financial commitments such as rent and household bills.

The Government should not only reinstate and extend the £20 week uplift. An independent review of benefits paid to Disabled people is urgently needed to ensure their adequacy and that they accurately reflect their disability related costs.”

The JRF report Dragged down by debt: Millions of low-income households pulled under by arrears as living costs rise is available from jrf.org.

See also our related news story Government £500 million support fund for “vulnerable households” no replacement for keeping and extending UC uplift says DR UK.