It’s only the end of the beginning for Covid financial support needs

By Sue Anderson, Head of Media

The past week has seen a confusing array of last-minute extensions, guidance and short-notice consultations, as regulators and policymakers try to get to grips with how to deal with the fact that the pandemic isn’t going away, and nor are the financial consequences for households. What next?

Just to recap — like other debt charities, we’ve been campaigning hard to ensure that households who’ve been hit hard financially by the Covid crisis aren’t left hanging out to dry in the aftermath.

Key campaigning points for us have been:

· Urging Government not to allow the re-imposition of tenancy evictions through the courts from 23 August, given that all the reasons why protection against them was put in place still exist. On 21 August the Government did announce a month-long extension, and a new requirement for landlords to give tenants six months notice, but that’s more of a holding position than a sustainable exit strategy to help people deal with rent arrears.

· Urging Government not to allow the reimposition of in-person bailiff visits from 24 August, given that all the public health reasons that drove the original temporary ban still apply — plus the fact that in-person visits bump up the fees charged to the person in debt, which is unlikely to improve their situation or result in good outcomes in current circumstances. While Government did not extend the ban, it did publish eleventh-hour guidance on the practical steps it expects bailiffs to take as they resume in-person visits — but has no way of adequately policing them. This is worrying, when even in normal times bailiff conduct is often poor and proper regulation isn’t in place.

· Urging the Financial Conduct Authority and the Government to ensure that there is meaningful ongoing support for people, including those coming to the end of the temporary payment holidays required of firms by the regulator as part of the initial response to the financial problems caused by the pandemic. We’ve seen the beginning of the regulator’s wider thinking in the form of its new draft guidance for mortgage lenders — which essentially shifts the dial from the temporary emergency pause to more formal, circumstances-dependent forbearance with its attendant impact on credit status, for those households who are not able to resume payments in full.

While we recognise that the logistics are complex and difficult, it’s vital that Government policy and FCA regulatory requirements work hand-in-glove to minimise the risk of vast swathes of households “falling through the cracks”.

The recent consultation guidance from the FCA about what firms should do to support mortgage customers who still need help beyond the end of mortgage holidays is a case in point — there has been no accompanying discussion from Government about the role of Support for Mortgage Interest, which has in recent years been deliberately curtailed to woefully inadequate levels, and recast as a loan rather than a benefit, that could leave households facing growing debts or losing their home. Yet, if reformed, this could potentially play a meaningful role in underpinning support for those home-owner households in greatest need.

As we look towards the end of the employment support schemes, the consumer credit payment holidays, and the (extended) ban on rental evictions, we can’t afford a disjointed approach. Too many people’s homes, lives and futures depend on it.

While the Government has so far focused some additional support to businesses — in the hope of tiding them over the worst of the pandemic and keeping them in business to be able to support jobs and the wider economy — it’s equally important to focus attention on individual households, including the most financially vulnerable.

While the employment support schemes were unprecedented and very welcome, they didn’t help target the most financially vulnerable who have had to rely on often much lower means-tested benefits — so entrenching the patterns of unequal financial resilience we have been seeing for some years.

It’s all too easy to see the potential policy dilemma between the economy and public health. If the economy tanks, then everyone suffers — yet supporting the economy at the expense of public health is irresponsible.

For people experiencing debt this is not just theoretical. Post-Covid public policy must not create a situation where people are forced to choose between their health and their finances (requiring clinically vulnerable people who cannot afford to lose their jobs to work in environments where they are at greater risk of contracting Covid, for example), or one that incentivises risks that harm wider society (if people can’t afford to quarantine, so continue to go to work, for example). Nor must it leave people hungry, homeless or desperate. Debt and poverty create their own public health problems.

We strongly believe there is a case for ongoing support to help people deal with debts build up because of Covid, either through grants or zero interest loans .Even from the perspective of a Government understandably desperate to rein in post-pandemic public spending, this will prove to be the most pragmatic solution and the lesser evil compared with the knock-on costs of failing to help. We will soon be outlining in more detail how we think the Government should proceed next.