McDonnell: Household bill and council tax arrears should be paused indefinitely

Former Shadow Chancellor John McDonnell has called on the UK government to help struggling low-income families with debt – as the state did for bankers in 2008 – by indefinitely suspending household bill and council tax arrears.

Setting out a ‘reset programme for domestic debt’ during coronavirus today, the Labour MP said: “The government helped the bankers on debt during the banking crisis – now it needs to help families facing debt as a result of the Covid crisis.”

McDonnell is using Claim the Future, a new economy-focused campaign group he launched in July this year, to highlight the devastating effect of the pandemic on family finances – and demand urgent action from the UK government.

The Labour left figure has recommended that state intervention to tackle the debt burden incurred by furloughed workers or those made unemployed should include the indefinite suspension of arrears on household bills and council tax.

He is also advising that outstanding debts to pay day loan companies, banks and credit agencies should be tightly regulated, with interest payments and fees curbed or waived to alleviate the strain on low-paid workers and those who have lost jobs.

The Labour MP said: “A huge personal debt crisis is being created by the pandemic as people being furloughed or losing their jobs and others on welfare benefits are unable to pay their rents, mortgages and other essential bills.

“Not only is this causing immense stress and hardship for many families struggling to get by, it will hold back the economy recovering and could risk another financial crisis as the debt becomes unsustainable.

“This is made worse by the high level of interest rates being charged and by unscrupulous lenders. The government is the only actor that can borrow at low interest rates and act to control and reduce company and personal debts.

“In the 2008 financial crisis, the government stepped forward to rescue the banks by taking on their bad debts. The government launched UK Asset Resolution, the so-called ‘bad bank’ that purchased problem debts from the banks to clean up their balance sheets.

“It’s time for the government to create a consumer equivalent to lift the debt burden off peoples’ backs, whilst better regulating lending including capping interest rates and charges on loans.

“This vehicle would allow people to offload problem debts and refinance at affordable rates, avoiding the excessive interest rates and extortionate fees made by some lenders and bailiffs.”

The policy platform, which forms part of a broader “socialist vision for a post-Covid economy”, will be published alongside a speech delivered by McDonnell at Claim the Future’s online conference ‘Resetting the Political Economy‘.

The events on Saturday will explore options for “radical” economic change, aiming to bring together activists, trade unions, academics and think tanks to build plans for a society offering “security”, “hope”, “fairness” and a “sense of a future”.

McDonnell-backed policies include a £15 minimum wage, a minimum income guarantee of at least £221 per week, and a jobs guarantee amid a massive infrastructure programme geared towards a just transition to a green economy.

The Hayes and Harlington MP, who served as Shadow Chancellor under Jeremy Corbyn, last month brought forward a bill in the House of Commons that would aim to block Covid financial aid from the government going to “appalling employers”.

In his first intervention in the UK parliament since stepping down from the shadow cabinet when Keir Starmer was elected Labour leader, McDonnell proposed a ‘ten minute rule bill’ on business standards and conditionality of coronavirus support.

The MP has also demanded the “urgent nationalisation” of the care sector, a call made in the summer amid fears of a second Covid wave, and for the temporary ban on evictions – which has now ended – to be extended for a further year.

He praised Keir Starmer’s approach to opposition during the Covid crisis as “exactly right” during an interview in August, and has urged Labour left members not to let themselves be “portrayed as oppositionists, shouting from the sidelines”.

But McDonnell has also been outspoken this week against the decision to suspend Corbyn from the party, warning that the Labour Party is “drifting towards a hell of a row over use of language, misinterpretation, followed by overreaction”.

At a Momentum rally on Friday, he said: “I’m here in solidarity with my longstanding comrade Jeremy Corbyn. What happened to him yesterday – his suspension – was profoundly wrong. That’s the bottom line. It was profoundly wrong and must be reversed.”