COVID debts hit rental sector hardest

The ongoing economic impact of the COVID-19 pandemic has been highlighted by a new report from the Resolution Foundation think tank that reveals how many families in the United Kingdom have fallen behind on rent or mortgage payments.

The study by the organization, which deals with the living standards of those on lower or middle incomes, showed mortgage holders are also affected, but the situation is worse for renters, with an estimated 450,000 families now behind on payments, a number that could increase with redundancies predicted to rise and the potential end of the furlough program.

"Despite widespread calls for forbearance in the face of the COVID-19 shock, just 3 percent of private renting families have been able to negotiate a lower rent over the last 10 months," the report says.

During the same period, one-quarter of private renters have seen their income fall, as opposed to around one in six mortgage-payers, and those in the rented sector are twice as likely to have had no savings to fall back on at the start of the pandemic.

Report author Lindsay Judge said the country faces "a mounting arrears crisis" that would become far worse unless there was "significant government intervention".

Welsh charity Hafal has said that what it calls a "debt time-bomb" brought about by the pandemic is causing a mental health crisis that has meant it is being "swamped" by calls from the public.

"It's going to be a very rough and bumpy few months. Obviously, we've still got the pandemic going on, but unfortunately the debt incurred during this period isn't going to go away overnight," said representative Adrian Nicholas. "The sooner people can start to obtain help with the money worries they have, the better it'll be for their financial health and their mental health."

Meanwhile, as speculation grows about what will be in Chancellor of the Exchequer Rishi Sunak's budget next month, the non-party-aligned Institute for Fiscal Studies has suggested the gradual winding-down of the furlough program, which has supported up to 10 million jobs for the past year, "as soon as conditions allow".

The budget is expected to try and balance supporting jobs and businesses, while encouraging companies to stand on their own two feet, making for a stronger economic revival.

"Any significant continuation of the furlough scheme must be limited and carefully targeted," said Institute for Fiscal Studies director Paul Johnson. "In the recovery phase, (Sunak) needs to support jobs and investment, but also crucially needs to recognize and address the multiple inequalities exacerbated by the crisis."

Members of Sunak's own Conservative Party have cautioned him against using budget tax rises as a way of repairing the huge damage done to public finances by the pandemic.

Some minor tax changes are expected in the upcoming statement, with more substantial ones likely in his second budget, later in the year, by which time it is hoped the revival will have built up more momentum.

But some on the right of the party think economic recovery should be prioritized over trying to help the public purse recover.

"I would aim to start thinking about balancing the books in three years' time," former Cabinet minister David Davis told the Financial Times. "The aim now should be to do everything conceivable to help the economic recovery."