People in Liverpool are facing a ‘debt avalanche’ when Covid-19 support is phased out this summer.
People in around half of the city’s neighbourhoods have fallen into debt during the covid crisis, making the city one of the worst affected areas in the country.
The figures come from new research from the Centre for Cities think tank, which is challenging the idea that people’s finances have benefitted from lockdown.
According to the research, carried out in partnership with Clarion Housing, Liverpool is in third place when it comes to towns and cities where people are likely to have fallen into debt during the pandemic, behind other northern areas like Hull and Bradford.
The report suggests that people in 47% of the city’s neighbourhoods are likely to have taken on debt over the period of the pandemic.
This contrasts with more affluent areas that have seen people save money during the pandemic and subsequent lockdowns.
The research suggests that a huge 80% of neighbourhoods in Exeter will have saved cash during the crisis, with York not far behind on 79% and Aldershot on 67%.
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The think tank is warning that the government’s roadmap for withdrawing Covid-support will hit people in the North and Midlands disproportionately hard and, in a blow to the levelling up agenda, risks leaving the UK more divided than ever.
Divisions between homeowners and people in social housing are also likely to increase, with social housing residents and people on low incomes far more likely to have fallen into debt during the pandemic.
During the covid crisis, people in richer neighbourhoods in predominantly southern cities cut down on luxuries and reduced their outgoings more than people in poorer neighbourhoods in – mostly northern – cities who spend proportionally more on food, bills and other essentials.
As a result, for every £1 that people from less affluent areas saved, people in richer areas saved £12.
Because of this, people in around half of neighbourhoods in Hull, Bradford, and Liverpool are likely to have been pushed into debt trying to meet the cost of essentials due to pandemic job losses, furlough and a lack of savings.
On the other hand, cutting non-essential spending has helped people in wealthier places save money.
People in Exeter and York are the biggest financial beneficiaries of lockdown, with those living in eight in ten neighbourhoods being more likely than not to have boosted their savings.
So far people have been shielded from the worst economic effects of the debt crisis by furlough, eviction bans and delays in the court system.
But there is a warning that the problem will come to a head later this year when most government support is withdrawn and the courts clear their case backlog.
Centre for Cities is now calling for the government to get ahead of this looming crisis with a series of interventions, including:
– Creating a specialist debt relief scheme for people who have incurred Covid-related debt. This debt should also not affect people’s credit scores.
– Keeping the £20 Universal Credit uplift, arguing that this will support local economies by keeping money circulating.
– Retaining the furlough scheme for sectors that still cannot operate at full capacity, such as travel and aviation.
Centre for Cities’ Chief Executive, Andrew Carter, said: “The pandemic has left this country more divided than ever. While people in mostly prosperous southern cities and towns have accumulated £150 billion of savings, many less affluent people in the North and Midlands will face an avalanche of debt as Government support ends later this year.
“The Government is withdrawing financial support far too quickly for people in places that have been hit hard by the pandemic. Not only will this set its levelling up agenda back significantly, it also risks levelling down many previously affluent parts of southern England such as Crawley.
David Orr, Chair of the Clarion Housing Association Board, said: “This research confirms that existing inequalities have deepened as a result of the pandemic. Many social housing residents were already in a precarious financial situation before the pandemic and are likely to have been disproportionately affected.
“As the largest social landlord in the country we do a significant amount of work to support our residents, but this needs to be complemented by government action. To ensure a fair and equitable recovery our residents need extra support to get back on their feet and a permanent £20 uplift in Universal Credit would make a significant difference to those in greatest need.”