The Spring Budget, and the Bank of England interest rate cut and liquidity support, will provide some direct and indirect support during the uncertain period ahead according to StepChange.
The debt charity says that it is almost inevitable that demand for debt advice is set to increase – and that the structural problems exposed by Covid-19 run deep. People who experience life shocks that impact their income are three times more likely than others to experience problem debt.
Richard Lane, Director of External Affairs at StepChange Debt Charity, said “Today’s announcements should help to underpin the economy through a rough patch, which is crucially important in supporting people’s jobs and hence their ability to meet their financial commitments – but individual households will also need more help. With nearly 10 million people in the UK already showing signs of financial distress, it’s crucial that comprehensive support is in place for households whose income is impacted.”
“As our research last year showed, people who have suffered a life shock in the past two years are three times as likely to experience problem debt as those who haven’t. We’re already contacted by more than 600,000 people a year and the debt advice sector already struggles to meet demand, which can only be expected to rise if there is any protracted downturn.”
Joanna Elson OBE, Chief Executive of the Money Advice Trust, said “Families and businesses across the country are worried about what Coronavirus will mean for their finances – and today’s Budget provides a much-needed boost to help them through the economic shock ahead. ”
“The newly-announced hardship fund for households and new support and forbearance for small businesses affected by the outbreak are particularly welcome – but it will be crucial to make sure that this support reaches those who need it most.
“Together with the Bank of England’s interest rate cut and the welcome additional forbearance measures announced by several banks in recent days, we are reassured that the impact of Coronavirus on household and business finances is being taken seriously.
“However, we can expect debt problems to increase significantly as a result of the financial shocks ahead for households and businesses. This comes at a time when the debt advice sector is already struggling to meet current levels of demand – and it will be crucial to work together to ensure that everyone who needs advice is able to access it.”
“Today’s Budget includes welcome changes to Universal Credit, with a lower cap on deductions from benefits and more time for people to repay advances. This is a further step in the right direction, but a more fundamental review of the deductions system is needed – along with a firm commitment to include Universal Credit advances and deductions in the government’s new Breathing Space scheme as early as possible.”
“We are pleased to see further action on affordable credit, with plans to allow credit unions to offer a wider range of products and services. However, 18 months on the Budget makes no mention of the No Interest Loan Scheme and we would welcome clarity on the government’s plans in this area.”
Stephen Haddrill, Director General of the Finance & Leasing Association, said “The measures announced to help the NHS, consumers and businesses to deal with the likely disruption of coronavirus are very welcome.”
“However, banks are not the only business finance providers, so the temporary Coronavirus Business Interruption Loan Scheme, in which banks will offer loans of up to £1.2m to support SMEs, would reach far more firms if non-bank lenders were also included in the plan.”
“Supporting customers over the next few months will be absolutely vital – especially for those whose income is severely affected by the coronavirus disruption. FLA members are there to help, so it’s important to keep talking to your lender.”
Dame Gillian Guy, Chief Executive of Citizens Advice, said “The Chancellor’s decision to extend statutory sick pay to those self-isolating will be a relief to some workers. But the self-employed and people in the 1.5 million jobs that don’t qualify for sick pay are still at risk of falling through the gaps if they become unwell.”
“We’re pleased to see the waiting period for contributory Employment and Support Allowance has been removed, but we know those who need to apply for Universal Credit will still face a lengthy wait for a full payment and could be pushed into debt as a result.”
“This unprecedented situation has exposed the long-standing flaws and inconsistencies in our sick pay and benefits systems. While today’s measures are encouraging, the government needs to take a longer term view and build on them to ensure our social safety net is fit for purpose.”
Freddy Kelly, CEO and Co-founder of Credit Kudos said We welcome the governments support and additional funding around providing breathing space for people with problem debt. The issue, however, isn’t just supporting people after the event but ensuring access to fair and affordable credit is given to the people who need it most. This can be done by incorporating open banking data into applications, affordability and credit models and not just using historic data when making credit decisions.”
Paul Burgess, CEO, Startline Motor Finance, said “It’s extremely welcome that the Government has unveiled a range of measures designed to protect the economy but really, the used car market over the next few months will depend very much on the spread of coronavirus in the UK and how the public react. It is noteworthy that the Government is now saying that the impact on the country will be ‘significant’. Certainly, it seems probable that people who are working from home and generally curbing their travel are probably going to be less likely to change their car, whatever steps are taken to protect businesses. There are simply a lot of unknowns.”
“However, the longer term investments that the Government are making are to be welcomed, especially in roads and EVs. Coming out of the other end of the coronavirus crisis, the economy will need boosting in the medium-long term, especially as we settle into a post-Brexit scenario, and it looks as though borrowing will be taking place to make that happen.”
Ian Larkin, CEO of online mortgage broker Trussle said “Today’s Budget and the earlier rate cut from the Bank of England indicate a robust economic response to the threat of coronavirus. We hope that this coordinated, swift action will help to reassure homeowners and maintain mortgage lending.”
“Amid the uncertainty linked to coronavirus, we’re continuing to provide advice to our customers. We hope to see lenders providing reassurance that existing mortgage applications will be processed as usual and that they’ll pass on the interest rate decrease as appropriate.”
Richard Pike, Sales and marketing director at Phoebus Software, said “Amongst the developing Coronavirus outbreak, this was always going to be a budget dominated by fiscal measures to help the country deal with the problem. However, it is also clear that the government is set on delivering on its manifesto promises and spend the money that we would otherwise be sending to the EU.”
“However, the main thing that is evident in the past 24 hours is that both the government and the Bank of England are looking at how the outbreak will affect the economy, personal finance and business stability very seriously. In the face of this threat we have already had a cut in interest rates and high street banks have agreed to increase overdrafts and allow mortgage payment holidays. Once again we are hanging in limbo, not knowing exactly how badly the country will be affected, or for how long. However, it appears that at least some of the burden will be born by the government as it commits to reimbursing companies paying out statutory sick pay and increases the access to benefit for the self-employed and gig economy.”