Scottish Labour calls for ‘COVID debt amnesty’

Scottish Labour has called for more to be done for families facing debt as a result of COVID-19.

Party leader Richard Leonard said a “debt amnesty” was needed to support furloughed workers, the unemployed and those on low incomes, as he warned of a “huge personal debt crisis”.

Before the pandemic almost three per cent of households in Scotland were in unmanageable debt, according to government statistics.

But a third of households were considered financially vulnerable because they did not have enough savings to cover the basic cost of living for three months.

Leonard has urged the Scottish Government to suspend arrears on household and council tax bills for the remainder of this parliament.

Meanwhile, the UK Government should place further regulations on pay day loan companies, banks and credit agencies, Leonard added.

He said: “A huge personal debt crisis is being caused by COVID as people being furloughed or losing their jobs and others on welfare benefits are unable to pay their rents, mortgages and other essential bills.

“This is made worse by the high level of interest rates being charged and by unscrupulous lenders.

“This is causing immense stress and hardship for many people struggling to get by. It’s also holding back a post pandemic economy recovery and could risk another financial crisis as the debt becomes unsustainable.

“The Scottish and UK governments must use their respective powers to introduce a COVID debt amnesty for furloughed and unemployed workers as well as those on low incomes and benefit.”

Recent analysis by debt charity StepChange found the number of people affected by severe problem debt across the UK has almost doubled to 1.2 million since the beginning of the pandemic.

It estimated that £10.3bn of borrowing and arrears is attributable directly to COVID, as more families have had to borrow money to make ends meet.

And the charity predicts 2.87 million people across the UK are at high risk of long-term debt problems.