How Covid rent debt crisis will get worse with Universal Credit cut

Highlights

  • StepChange debt charity has warned that Universal Credit cut will worsen the £360m Covid rent debt crisis.
  • The research suggested one in every ten renters anticipated eviction from their homes due to their debts within the next one year.

UK's leading debt charity StepChange has recently warned that the Covid-19 rental debt crisis across will worsen further due to imminent cuts in the Universal Credit. The calculations done by the charity, which gives out free debt advice, has shown that at present approximately half a million private tenants are making an effort to stay on top of £360 million in rent arrears across the country. The charity has given a warning that the £20-per-week cut to Universal Credit, rolled out by the UK Government, will worsen the crises by rapidly increasing the established difficulties.

Phil Andrew, chief executive of StepChange, said that the Covid support schemes rolled out by the UK Government has acted as a life saver for many, but they haven’t been able to support the renters in addressing their arrears. Additionally, with cuts to the Universal Credit and the end of the furlough scheme, the threat of many people losing their homes can be a truth soon.

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He added that his charity was reaching out for a dedicated financial support with the aim of supporting renters in the process of safely bringing down their rent debts and avoid losing their homes. By doing away with the planned Universal Credit cut, and creating a dedicated rent debt fund, it is possible for the UK Government to ward off the danger of rising evictions, problem debt and homelessness that will aggravate the financial and social problems and in turn lead to obstruction in economic recovery.

As per the research of StepChange, which based on the responses of 8,600 people, it was suggested that 1 of every 10 tenants anticipated eviction from their homes due to their debts within the next one year. The stress due to increasing debt has been affecting the mental health of people.

As reported by The Financial Times earlier this month, a Whitehall official said that the impact of the Universal Credit cut could potentially become catastrophic as it would lead to increasing homelessness and food bank use. Nevertheless, a spokesperson for the Department for Work and Pensions took a stand that a formal impact assessment had not been carried out yet for the decision.

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Thérèse Coffey, the work and pensions secretary, recently provoked outrage by suggesting that the claimants of Universal Credit should just work more hours to compensate for the £20-a-week cut.

Bottom line

Objections were later raised against this suggestion as Universal Credit payments are designed in a way that they automatically adjust to represent the level of earnings of people, which in turn means that people earning an extra £20-a-week would also be liable to lose a part of their benefit.

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