There have been calls for debt relief for the general population, as fears about the economy are prominent due to the current COVID-19 pandemic.

This deadly virus is not only just affecting our health, but it is also having huge effects on our work life, home life and educational sectors. When businesses are forced to close, therefore stopping workers from receiving their usual wage people find themselves in a sea of not only anxiety – but debt. Especially with the stress of a family to feed, bills, rents, mortgages or just not having access to disposable income people are finding themselves in a territory they may never have been in before.

Even if you have savings and no debt, the situation can still be a hard one as you may find it difficult to manage your money at such an unclear period in history.

Therefore, many people are looking towards the government to help them at this stressful time. As a suggested solution to this chaos, the economists Gabriel Zucman and Emmanuel Saez have called for a social insurance scheme to aid people that are struggling during this world health pandemic. This scheme would be beneficial to businesses and workers alike. For example, if the airline industry sales drop by 70%, the government would then buy the equivalent to this percentage in tickets to keep businesses afloat.  This intervention has not only been named as beneficial but also necessary to keep the economy intact in order to avoid a huge disaster in all sectors of business. 

Debt relief programmes have been seen to be implemented before. For example, in the United States, they were fairly common in the 19th century. More recently than that, however, India implemented a debt relief programme in the midst of the 2008 crisis. This crisis accrued mainly in the agricultural sector. Many studies have found that these kinds of programmes have really helped to aid debt not only for businesses but also for households.  

Of course, this kind of system needs to be carefully set out to ensure people do not take advantage of it and the money is going in all of the correct places. As with anything, there is a risk. However, can the country function while in crippling debt? What are your thoughts on this? Do you think this is a sensible idea for our counties future?

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more