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Closing the gaps – what our advisers are hearing, and why the Government must act

Our Public Affairs and Policy Manager Grace...

Grace Brownfield

Senior Influencing Manager at Money Advice Trust

Posted April 20, 2020

Our Public Affairs and Policy Manager Grace Brownfield outlines the Money Advice Trust's Closing the gaps briefing on the Government’s Covid-19 financial support measures so far.

Like all of us, so many times during this outbreak I have found myself using the word ‘unprecedented’. Indeed, when the Chancellor stood up exactly a month ago and announced the Coronavirus Job Retention Scheme and other emergency measures, it seemed the very definition of the word.

You don’t have to spend long listening to the calls we’re receiving on our National Debtline and Business Debtline advice services to see just how significant the impact of Covid-19 has been on people’s livelihoods. The situations of those contacting us show very starkly just why such an unprecedented package of measures is needed; but also why – as welcome as that support is – it’s still incomplete.

Early indications of the impact of Covid-19

We've analysed calls to our National Debtline and Business Debtline services since the outbreak began, as well as looking at the issues those using our website are reporting, to understand the challenges people are facing and the impact of support announced to date. Our new Closing the gaps briefing,released today, sets out what we’ve found and highlights four key areas where further Government action is urgently needed.

So, a month on from the Chancellor’s announcement, what are our advisers hearing?

Worries about keeping up with council tax, rent and other essential bills widespread.

"I haven't worked for three weeks, because I have symptoms of Coronavirus and I’m self-isolating. I am still suffering from a symptom of Coronavirus and in accordance with government advice, I must continue my self-isolation, so I have real problems paying my bills.”

“I’m a private renter in East London. Due to loss of work/income, I will go into rent arrears in less than a month, even with Universal Credit, as I'm subject to the benefit cap. I’ve asked my landlord if I could pay a reduced (by 20%) amount of rent for the next 3 months, and am waiting to hear back."

Some people, particularly the self-employed, have experienced a total drop in income. Many have little or no savings to get them through.

“I am a personal trainer who leases a studio to work from. I have spent several thousand pounds building the business and now have zero income. I have a young family with three children.’’

Being able to ‘get by’ until support from new government schemes arrive is therefore something that’s dominating calls to debt advisers.

"We can survive one month - then we are done - we need emergency help now. Our dedicated staff, on minimum wages will be on zero wages if we cannot access such support. Our main income was from our shop. It has all gone!’"

We are also hearing a lot of concern from those who are not eligible for the government schemes, particularly the Self-employment Income Support Scheme.

"We are partners in our own training company (Ltd.), with no other employees. We have cancelled all of our training for the foreseeable future. Our income will completely run out by June and I don’t think we’re eligible for the government schemes."

How the Government could close the gaps

The package of measures announced so far is welcome. However, based on what we’re hearing through our services, further action is needed. We’ve set out three key gaps and how these need to be addressed, in addition to the urgent need to end the five-week wait for new Universal Credit claims that the Coronavirus crisis has made even more pressing.

Stall council tax bills and pause collections and enforcement action on arrears for three months

The Government has provided some support on council tax bills – through local hardship funding to local authorities. In addition, some councils have announced additional forbearance for people struggling to pay.

However, these practices are far from consistent and vary greatly between councils. There is a significant risk that many people could still face unreasonable pressure to pay, even when they clearly cannot afford this.

We would therefore like to see the Government providing additional funding to enable all local authorities to offer payment holidays on council tax bills for those struggling to pay due to Covid-19. They should also instruct councils to pause all arrears collection and enforcement action – including suspending all contact from bailiffs, and not just bailiff visits.

Protect self-employed people facing immediate hardship

Once up and running, the Self-employment Income Support Scheme will be a lifeline for millions of self-employed people whose businesses have been hit harder by the Coronavirus outbreak than many could ever imagine. However, we are already seeing that having to wait until June for payments to come through is causing hardship for many, including callers to Business Debtline.

We re continuing to make the case for a dedicated hardship fund for self-employed people experiencing immediate hardship while they await help from the Income Support Scheme.

In addition, with around a third of callers to Business Debtline being directors of small limited companies, we support calls for** action to ensure that owner-directors have access to income support based on their whole incomes, including income received through dividends and not just PAYE**. This is a contentious issue due to differing tax treatments – but even if it was decided that income support on dividends should be set at a lower level than 80%, this would still make a significant difference.

Support renters who are unable to meet their rent payments

The fact that there has been such an immediate and significant take-up of mortgage payment holidays, with over 1.2 million now in place, shows the scale of the number of people having difficulty meeting their housing costs due to Covid-19. We expect a similarly high number of renters to struggle too.

Right now, many renters are reliant on how their landlord responds to requests for forbearance – and there is significant inconsistency.

While there has been welcome action on evictions, we also need to see greater support to ensure people can afford to pay their rent. Many people – especially new claimants of Universal Credit – will have housing costs above the 30% Local Housing Allowance (LHA) rate.

We would therefore like to see the Government increasing the LHA rate to 50% of market rents, as well as additional funding for Discretionary Housing Payments. Without this, there is a risk we could see a significant increase in evictions as soon as courts reopen and emergency legislation and rules expire.

Crucially, in addition to closing these gaps, we hope the Government will listen to growing calls to end the five-week wait for Universal Credit payments, by converting advance payments into grants, to get help fast to the huge numbers of people falling back on the benefit system.

These actions from Government now could make a huge difference in reducing the number of people who fall into problem debt from Covid-19. We hope they will listen – not just to us, but to those already contacting us for help who are falling dangerously between gaps in existing support.

Read the Money Advice Trust’s new Closing the gaps briefing.

Grace Brownfield

Senior Influencing Manager at Money Advice Trust

Grace is the Money Advice Trust’s Senior Influencing Manager. She previously worked in the policy team at StepChange Debt Charity. Before that she worked on issues related to the financial impact of cancer at Macmillan Cancer Support and NSPCC. View all posts from Grace Brownfield.

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