“Debt nightmare” brewing for families on Universal Credit

A “debt nightmare” is brewing for UK families, according to a survey by the Joseph Rowntree Foundation (JRF) and Save the Children. The report revealed that 60% of families on universal credit have been forced to borrow money due to the impact of the coronavirus pandemic, resorting to payday loans or credit cards to cover costs.

The findings also outlined how 70% of British families have cut back expenditure on food and other essential items, while half have struggled to pay rent and household bills as record numbers of employees have been furloughed or dropped from payrolls altogether.

Earlier this month, it was reported that UK household debt had risen to £6 billion amid mounting credit card payments and utility bills. The JRF survey found 86% of those with children on universal credit or child tax credits have faced additional household costs due to the pandemic.

In a joint statement, the JRF and Save the Children commented:

“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”.

Both organisations are calling for the UK government to extend an “urgent lifeline” by way of a £20 increase to universal credit and child tax credit. The demands come in light of the widely-publicised U-turn on free school meals following footballer Marcus Rashford’s open letter to MPs, urging an extension of the coronavirus meal voucher scheme for vulnerable children.

Since the beginning of the coronavirus pandemic, the Department for Work and Pensions has received more than 2.3 million new applications from families for universal credit – on top of 2.6 million from before, out of which almost 1.2 million were families with children.

Acting director of the JRF, Helen Barnard, commented on the concerning figures:

“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”.

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Junior Journalist at the UK Investor Magazine. Focuses primarily on finance and business content. Has personal interests in Middle Eastern politics, human rights issues, and sustainability initiatives.