Debt Time Bomb

Scotland is facing a ‘personal debt time bomb’ as the country deals with the fallout from the Covid-19 pandemic, Citizens Advice Scotland (CAS) has warned.

The latest wave of Scotpulse polling for the charity reveals that 27 per cent of people in Scotland are concerned about making debt repayments during coronavirus.

CAS is warning that as the furlough scheme is lifted, payment holidays end and job losses become more significant, this will lead to a large increase in the numbers of people with unmanageable debts. 

Other results from the polling include: 

– 24 per cent of people are concerned about paying utility bills;

– 26 per cent are concerned about paying rent;

– 19 per cent are concerned about mortgage repayments;

– 20 per cent are concerned about paying for food and essentials;

– 21 per cent are concerned about Council Tax;

– 35 per cent are concerned about their income levels in general. 

CAS Financial Health spokesperson Myles Fitt said: “Temporary measures to protect income during Covid-19 have been welcome and broadly successful, but it’s clear that Scotland is facing a personal debt time bomb as we emerge from lockdown and slowly begin to restart the economy.

“Managing this situation will require thoughtful and significant intervention from policy-makers.

“The Citizens Advice network in Scotland is one of the biggest providers of free debt advice in the country and, prior to lockdown, debt was the second biggest issue seen by our advisers. The issue is most often a result of insecure or low incomes which are simply not able to keep pace with the cost of living. 

“While concerns about unemployment have understandably replaced it for the time being, the issue of personal debt will become a real challenge in the coming months and years. An income shock from a job loss or reduced pay, combined with the cost of arrears such as council tax, housing or energy bulls built up due to COVID19 payment holidays, will put individual and household finances under extreme pressure. 

“Our fear is that many households will fall into unmanageable debt, causing financial hardship and pushing more people into poverty, or exacerbate existing poverty.

“There are a range of measures policymakers could take to help people, specifically maximising incomes and minimising the cost of living. Efforts to pursue arrears must take into account people’s ability to pay and ideally repayments should be spread as thinly as possible, while local authority debts over five years old, such as council tax or rent, should be written off altogether.

“If people are struggling with money and debt problems they can always turn to their local Citizens Advice Bureau for free, impartial and confidential help.”

Mark Diffley, who conducted the polling, said: “This is the fourth in our series of polls which continue to shine a light on the financial difficulties facing many households in Scotland as a result of the Coronavirus pandemic. 

“Whilst we noticed in the last wave that levels of concern about paying for life’s necessities had fallen a little after the initial impact of the virus was felt, it is now notable that those levels of concern have largely stabilised, leaving a significant minority of the population in financial hardship.

“Overall, a quarter of Scots remain concerned about paying utility bills and paying their rent (24% and 26% respectively and both unchanged in the last month), while 20% are concerned about paying for food and essentials (down from 23% last month) and 35% about their income (down from 36% last month). 

“Of additional concern is the finding that, once again, it is apparent that the highest levels of concern are recorded from those in the poorest socio-economic groups who are least likely be able to bear the financial burdens which they are facing as a result of the virus.”

Local advice organisation Granton Information Centre is already seeing some worrying signs.

A GIC spokesperson said: “People who were experiencing debt problems before the coronavirus lockdown have not been pursued by creditors for months, but we are now beginning to see the evidence that that is changing.

“People who had debt before lockdown still have to deal with that debt, and we fully expect to be dealing with many new clients when furlough ends and more and more people are made redundant in the weeks and months ahead.

“This will be a worrying and confusing new experience for many local people, particularly those who have never experienced unemployment before.

“The benefits system is complicated and can be hard to get your head around, but help is available. We would urge people who find themselves struggling to seek advice immediately. Debt problems don’t disappear if you ignore them and the quicker you act, the better.”