The UK government is to boost funding for debt advice services in light of COVID-19, just as a leading charity warns that households face a “debt tsunami” as a result of the pandemic.
The Treasury said on Tuesday it would make an additional £38m ($48m) available to debt charities and other money advice services.
£20.6m will come directly from the government, with a further £14.2m being raised by a one-off increase to the Financial Services Levy. Another £3m will be provided by the Money and Pensions Service, which will administer the new funds.
“We know that some people are struggling with their finances during this difficult time, which is why we want to make sure people can access the help and support they need to manage their debts and get their finances back on track,” John Glen, the economic secretary to the Treasury, said in a statement.
“The joint funding package will help debt advice providers to continue with — and increase — their vital work.”
The boost came as debt advice charity StepChange predicted that 4.6 million householders would rack up £6bn in debts during the pandemic.
“We were already dealing with a debt crisis, but Covid has so far added another four million people and counting to the number who are gong to need help finding their way back to financial health,” StepChange chief executive Phil Andrew said.
Andrew welcomed the additional funding but said it was “a worrying signpost to the bumpy road ahead for household finances.” He called for additional policy action to support those in debt. StepChange has called for a central fund of £5bn that would issue grants to help those who have fallen behind on payments, reform of Universal Credit, and the tapering of current mortgage and other payment holidays.
Caroline Siarkiewicz, chief executive at the Money and Pensions Service, said: “The impact the coronavirus pandemic will have on people’s financial wellbeing is significant and will continue for some time.
“We know there will be increased demand for free, expert debt advice services over the coming months and this extra funding will help to ensure that more people can access help more quickly.”
Figures released by the Bank of England last week showed that Brits paid off a record £7.4bn ($9.3bn) of debt in April. UK households paid off £5bn in credit card debt alone in April, more than double the record £2.4bn paid off in March.