The contrast between increased savings for some households and increased debt for others is one of the most striking aspects of the pandemic. Sadly, however, many feel too embarrassed to reveal the debt pressures they are under.

Pride is important, and most struggle behind closed doors: a visit to the pawn shop here, desperately hoping that no-one you know will see; a pay-day loan there, to keep the wolves from the door; the relentless juggling act of deciding which credit card or bill you can delay this month to keep your head above water.

Worse still are the longer-term financial decisions made in those moments of desperation. Those with poor credit scores who, in the hope of consolidating their debts, or securing more manageable payment terms, fall prey to unscrupulous high interest lenders, who in some cases will require their home as collateral.

In Salford, the situation is acute. In the wake of the last deep recession, Greater Manchester Poverty Action reported that most local authority areas in its remit were at or near the debt peak – so we entered this pandemic in a precarious situation.

Those in the most income-deprived areas are likely to rely on debt more; and, moreover, these areas are more likely to be subject to a ‘poverty premium’ – if you earn less the costs of many things, including debt, are much higher. And while the government may talk about the billions that have been spent on support during this pandemic, the reality is that millions have been excluded and forced into even further debt.

Research from the charity StepChange reveals levels of household borrowing and arrears have soared to £10.3 billion since the start of the pandemic, an increase of £4.3 billion (66 percent) since May 2020. They found that, of those who have made an application for Universal Credit since March, 24 percent were in severe problem debt and 28 percent are showing signs of financial difficulty.

This is worrying in itself, but the health implications are even starker. In December 2020, Glasgow Centre for Population Health found that approximately 4.5 million borrowers with insecure debt suffer moderate to severe ‘financial distress’. They found that those with this form of debt are significantly more likely to experience mental disorders compared with the wider population and that there are also links to worsened physical health.

Indeed, just take a snapshot of one group currently experiencing financial distress: the millions excluded from the government’s income support schemes. The impacts on mental health are striking: recently, a spokesperson for Excluded UK said that the group had noted 13 suicides to date and documented widespread mental anguish.

In one case, the spokesperson said, ‘I had a woman who posted on our Facebook group asking for someone to come and collect her dogs because she couldn’t afford to feed them anymore. She herself had been eating dog food because that was the only thing she had left in her house.’ We need to heed these warning signs urgently.

Rising household debt levels are a public health crisis as well as an economic one. And there are a number of short term measures the government could implement.

They could provide financial support to those excluded from Covid schemes, ensure that furlough schemes run for as long as needed, increase the amount and provision of statutory sick pay, increase funding for Local Welfare Assistance Schemes, reduce the waiting time for Universal Credit (UC) and maintain the £20 UC uplift, suspend bailiff collections, introduce a Covid Rent Debt fund to clear arrears, support Housing Associations to better support residents in difficulty and underwrite risk for credit unions and debt relief mechanisms. These are only for a start.

In the longer term, they must look at capping interest rates for certain loans or for those with low incomes, as well as capping the total amount that can be paid in overdraft fees or interest payments. There is also a real need for the creation of a ‘consumer’ version of UK Asset Resolution, the public finance company set up to purchase problem debts from banks during the financial crash.

As we know, many lenders sell on their problem debts for a fraction of their value, only to be enforced again by debt collectors at their full value – but such a public vehicle would allow the offloading of these problem debts to be refinanced at affordable rates for borrowers. Only the government can borrow at the low interest rates needed to make this happen effectively.

But the growing problem of debt is not going to go away quickly. We need to think boldly about it – particularly in the aftermath of this pandemic, when debt burdens that were ‘frozen’ will come due, and the overhang is likely to severely undermine the recovery.

A really bold option would be a ‘debt jubilee’. This should be examined – the option of writing off some debts for households and businesses who will simply never be able to repay them even at more affordable rates is not pie-in-the-sky, it will be the reality of post-pandemic economics in many countries across the world.

Even former Chancellor George Osborne has called for all coronavirus emergency debt accrued by small and micro businesses to be forgiven. This would, of course, need to be limited very strictly to specific types of problem debt.

But, for instance, if a lender decides that an outstanding loan is simply not going to be repaid, why couldn’t they discharge these debts and be offered a tax break in return? This would prevent a ripple of bad debts from spreading across the economy and feeding uncertainty.

As Johnna Montgomerie argues in her book Should We Abolish Household Debt?, cancelling or reducing the cost of some harmful debt would have been far more effective than monetary policy in ending the wider economic stagnation caused by the 2008 financial crisis. The same is true in the aftermath of the pandemic.

Of course, it is important to realise that none of the above represents a panacea to the debt crisis. In the 40 years preceding the pandemic our economic model had developed a destructive dependency on household debt to compensate for wage stagnation. Therefore, when the pandemic hit, health inequalities, poverty and job insecurity meant that many realised that their financial security was built on sand.

Business debt was also used to substitute for the lack of public investment that comes from an absent industrial strategy. This meant that many firms were too close to the edge to deal effectively with the pandemic – resulting in record-breaking quarterly redundancy rates.

The only long-term way to tackle these root causes is a paradigm shift towards a democratic economy, fuelled by industrial strategy and social policies; one that pursues the fundamental goal of economic security for all.

Today, though, there is an urgent crisis: a pandemic debt trap. At the very least, we must support those who need help – before it becomes a prison.