CAP highlights the case of Beth, a care worker with £21,000 in debt, including £7,200 from an income support overpayment 20 years ago. The age of debt meant that when she was ordered to pay, she had no idea if it was okay or how to appeal. Such tales are not uncommon. The Child Poverty Action Group has calculated that nearly two million children live in households where debt payments are taken from Universal Credit for historical mix-ups of tax credits, benefit advances plus recent, etc.
Even the right-wing think tank, the Center for Social Justice, has suggested writing off tax credit debts that are more than three years old, arguing that trying to recover them “isn’t efficient or effective.” But in recent years, the government has done the opposite: launched a campaign to go through records dating back to 2003.
According to the CAP, two-thirds (64%) of people with government debt live below the poverty line, meaning they are significantly poorer than those who go to the charity for get help only with consumer credit debt.
These are debts borne overwhelmingly by the poorest and owed to the government – in other words, the Crown. Why not write it all down?
“Looking at government debt would be a really good way to go just to relieve some of that pressure on low-income households,” Cox said.
The government – the Crown – could lead the way by doing this from its own departments, and also use the central purse to reimburse local authorities who owe money for council tax arrears, rent and social care.
Whole class immersion
Those who oppose debt cancellation will cry ‘moral hazard’ and claim that ‘forgiving us our debts’ would simply encourage reckless behavior in the future as people fall back into debt.
But those who fall behind on basic necessities are not morally deficient and are not “sinners.” They’ve been let down by chaotic systems that have generated overpayments through no fault of their own, or by Universal Credit, with its impossibly harsh penalties for missed appointments, which effectively turn payments into a loan that must be repaid. .
It is not greed that has put these people in debt to the government – it is benefits and benefit eligibility that are deliberately set at some of the lowest levels in the developed world. It impoverishes a whole class that, even though their household works all the hours God sends, increasingly cannot earn enough to live in our globalized, post-industrial, low-wage, stagnant economy.
The way to avoid “moral hazard” and keep people from falling back into debt after the debt jubilee is to mend the tattered safety net.
Even before energy bills started to soar last fall, nearly four million low-income households were in debt on their bills, with 1.4 million in council tax arrears, the same number of debts to their energy supplier and almost a million in rent arrears. That’s triple the number of households that were in arrears before the pandemic took its toll.
Some might argue that dumping around £16billion back into the pockets of the country’s poorest would only fuel inflation – but even the head of the Bank of England has acknowledged that it’s soaring commodity prices raw and other supply shocks, not excess money, which is responsible for 80% of the inflation overshoot in the UK.