- Nearly 80 civil society leaders and academics call for urgent freeze on personal debt payments
- Letter to the Chancellor also calls for write-off of existing council tax and social security debts
A group of nearly 80 academics, policy experts and leaders of charities, trade unions and community groups have written to Chancellor of the Exchequer, Rishi Sunak, calling on him to provide an urgent, interest-free freeze on personal debt payments for people affected by Covid-19. The letter also calls for a write-off of existing council tax and social security debts to provide extra breathing space for low-income families struggling with rising costs because of the pandemic.
Sarah-Jayne Clifton, Director of Jubilee Debt Campaign and one of the signatories said:
“Without urgent action to give families more financial breathing space Covid-19 will drive personal debt levels through the roof. We need the government to act now and freeze payments on debt, council tax, rent and utilities for those affected, with no build-up of arrears, alongside a write-off of historic unpayable council tax and social security debts.
“Rishi Sunak should be commended for the swift action he has taken to protect workers and their incomes. But the moves have still come too late for many thousands of workers and fall dramatically short of what’s needed for those on low incomes and those unable to work.”
The letter highlights that, despite the significant measures already announced, delays and gaps in the Government’s support package and the major existing weaknesses in Britain’s social safety net mean that millions are already facing a dramatic drop in their incomes because of Covid-19. Without additional action by the Government, the pandemic will mean a further large-scale rise in personal debt levels and could push millions more into the growing household debt trap.
The letter also calls for more help to be made available to impacted households in respect of council tax, rent and utility bills for those who need it, with no build-up of arrears on these accounts, and for the Government to suspend all collection activity on household debts and all enforcement activity by bailiffs, enforcement agents and others.
Damon Gibbons, Director of the Centre for Responsible Credit, another signatory said:
“A number of banks have come forward with proposals for interest-free overdrafts, which is very welcome. But we need a consistent approach, across the whole of the consumer credit market. That must involve the prevention of lenders charging interest on existing debts during the payment breaks that millions of people now need. And, critically, people needing to suspend payments must not see their credit scores suffer.
“The FCA must put in place clear rules to achieve these objectives across the market as a whole and lenders may need to be provided with additional liquidity from the Bank of England to make an interest freeze for affected households a reality.”
Banks are in talks with the Financial Conduct Authority, about relaxing the rules on credit card payments so that credit card bills could be postponed for up to three months [1]. The banks’ proposals would, however, allow them to continue to accrue interest during the repayment holidays, generating extra profits for them as a result of the crisis while increasing the indebtedness of affected households. The civil society letter argues that no interest should be charged on the proposed repayment holidays.
Read the full letter from civil society leaders and academics.