05What needs to change?
While the pandemic has undoubtedly enabled some to save more, this research shows that the financial situation of a significant share of the population, particularly in cities and large towns in the North and Midlands, has deteriorated.
This has important implications for the recovery as the quick bounce-back predicted by the Bank of England, thanks to accumulated Covid-savings, is likely only to occur in some parts of the country. Others will instead have to cope with increased levels of debt and problem debt.
The Government’s support initiatives throughout the pandemic – as well as family networks and delays in the Court system – have helped cushion people from the worst effects of the debt crisis. However, the reopening of the economy and the consequent phase-out of Government support is likely to set off a domino effect of bills and debts piling up.
The Government’s task as the UK enters the economic recovery phase is to avoid this, supporting people who have been hard hit by the events of the past 15 months so they can stay afloat. It should do this by carefully timing how, and when, current support measures are withdrawn, and by introducing new initiatives. In particular, the Government should focus on four main areas:
1. Support people with their immediate spending needs:
- Extend the ban on rent evictions, mortgage holidays and payment holidays for people who are struggling financially as a direct result of Covid-19. This should last at least until the end of the year to allow the economy to fully readjust after the Coronavirus Job Retention Scheme is phased out.
- Extend the Free School Meal programme to cover eligible children during the summer holidays.
2. Support people dealing with debt:
- Introduce a debt relief programme for specific debts that people have accumulated during, and because of, the pandemic.
- Mandate that small debt accrued during the pandemic does not affect people’s credit scores.
- Maintain the increased level of Government investment in debt advice services after the pandemic ends.
3. Protect income:
- Make the £20 uplift for Universal Credit permanent and review the current social security system to bring it in line with that of other European welfare states.
- Extend the Coronavirus Job Retention Scheme to sectors that will continue to be affected by the pandemic after the summer, such as the aviation industry.
4. Level up for the long term:
- Address the underlying causes that make the economies of some places weaker, and mean people are more likely to have smaller financial cushions, by:
- Encouraging people back into city centres for work and leisure, to create job opportunities for those hit hard by the pandemic in retail and hospitality.
- Providing free training for people made redundant during the pandemic who wish to retrain, regardless of their existing qualification level.
- Creating job opportunities and attracting high-value businesses to cities and large towns with weaker economic performance in the North and Midlands.