Household debt is “rocketing” in Wales, poverty think-tank The Bevan Foundation has warned in a new report, with low-income, BAME, and renting households among the hardest hit by the “uneven” impact of the pandemic.

The warning comes ahead of a Westminster debate this afternoon on the UK government’s controversial plans to cut Universal Credit by £20 per week, amid fears that the situation could continue to deteriorate for the most vulnerable.

Dr Steffan Evans, Policy and Research Officer at the Bevan Foundation, said: “The evidence we have uncovered raises real concerns that the pandemic could have a scarring effect on indebted individuals.

“Given the unequal impact of the pandemic on debt, this would undermine any hopes at securing a fair recovery.

“Both the Welsh and UK governments should therefore take action to help those who have fallen into debt as a result of the pandemic clear what they owe.

“Both governments must also ensure that stronger preventative measures are in place to prevent more people from falling into problem debt in future.”

READ MORE: Warning Universal Credit cut will be 'devastating' in Wales

The report was based on a study that surveyed more than 1,000 households across Wales, as well as interviews with people across the country.

Around one in 10 Welsh households had fallen behind on at least one bill between January and May this year, the report says, largely on utility bills such as electricity, water and gas supply, as well as rent.

These bills are considered “priority debt” by UK charities, as arrears can result in a person losing the ability to heat and light their home, or losing their home entirely.

Four percent of Welsh households were in council tax arrears, and another four percent were behind on credit repayments for loans, credit cards or hire purchases.

Rob Palmizi of Citizens Advice Bureau Cymru says that the service’s debt advice webpage saw its highest ever traffic August this year, while views on its Universal Credit entitlement page have increased by 50 per cent.

He echoes the Bevan Foundation’s warning with concerns that the withdrawal of government financial support schemes may escalate existing problems.

“What we’re predicting is that we’ll see a huge increase in people falling into the red once the £20 Universal Credit uplift is cut,” Mr Palmizi says.

Household income and housing tenure were significant predictors of household debt, with problem debt “overwhelmingly concentrated in lower-income households”, and renters – particularly social housing renters – also at heightened risk.

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Disabled people were twice as likely to be in debt during the pandemic than non-disabled people, and BAME people, as those most likely to be on low wages or in unstable “gig economy” work, were also acutely impacted.

Dr Steffan Evans explains: “Low-income households, renters, disabled people, 25 – 49-year-olds, lone parents and BAME households, were all at a heightened risk of living in problem debt before the pandemic.

“These have been among the groups hardest hit by the economic impact of the pandemic, meaning that problem debt has become an even greater concern over the past 18 months”. 

Nearly a fifth of households admitted they had borrowed money between January and May this year to cover the cost of essentials, with those on low-incomes most likely to rely on help from family or friends.

One Cardiff mother told researchers: “I owe my mother loads.

“I’ve managed to pay back my partner’s family, but I still owe my mother loads.”

Another Cardiff resident said: “Some of the families lost their job, especially zero hours workers so there is huge financial difficulty in the area.

“Some people have struggled, especially the taxi drivers, they have arrears with their housing.

“The government did give help with a grant or something like that, but, I know, my friends have a problem with rent arrears and are behind on their bills.

“It was terrible during the first lockdown.”

READ MORE: Devolved governments call on UK to reverse Universal Credit cut

The report notes that poorer households have been subject to further financial struggles during the pandemic. This has likely been due to factors such as reduced working hours, reduced pay during furlough, a lack of financial support for those self-isolating, and utility bills that rose while people spent more time at home during lockdown periods.

The think-tank also suggests reduced public transport services during the pandemic may have increased costs for some households, as people unable to catch a bus or train to the supermarket may have instead paid for taxis or shopped at more expensive local convenience stores.

Some households, they said, may have seen some savings in the form of reduced commute, leisure and childcare costs – but this is less likely to be the case for those in low income, insecure work.

Mr Palmizi believes that governments should be doing more to tackle and prevent debt.

“Council tax is the biggest debt that we see, and it has been for quite a few years,” he said.

“In our research we found that they target vulnerable people; of people in debt, you’re more likely to be targeted by bailiffs if you have a mental health condition or a long-term health condition.

“It’s easier to get a payment through fear-mongering, with all the extra stress vulnerable people have.

“Interestingly, we found that despite the cuts to debt collection during lockdown, the amount that councils took stayed relatively stable.

“We want the Welsh Government to identify and implement ways to improve council tax collection practices to ensure that they don’t push people who have accrued arrears into more debt.

“We want them to stick to the six month notice period for evictions, and make it permanent, raise awareness on the council tax reduction scheme, and look at payment deferments schemes during the pandemic.”

This afternoon MPs in the House of Commons will debate the Conservatives’ controversial plan to cut the £20 weekly uplift to Universal Credit instituted at the beginning of the coronavirus pandemic.

Research by the Joseph Rowntree Foundation suggests that more than a third of families with children in Wales will be affected by the cut in all bar three constituencies.

Yesterday Therese Coffee, the UK Secretary of State for Work and Pensions, was heavily criticised for suggesting struggling benefit claimants could do “two hours’ extra work” instead.

Free debt advice and support is available through the charity StepChange here.

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