So if this happens to someone, they can make an iCloud backup, erase their phone, then restore from iCloud.
Then they can make sure to never encrypt local backups again.
Sounds pretty reasonable to me. Might be unfair if there was no workaround, but there is.
Trouble is the iCloud backup doesn't include everything that an iTunes backup does, as I understand it anyway.
I use the Notes app for example and the backup does not include Notes.
Also I have a 128GB phone with over 100GB used - my existing encrypted iTunes backup is way over the iCloud 5GB free storage tier limit in size. (Just checked it's 18.3GB)
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EDIT - just to elaborate a little further on why this happened to me and why I maintain that the way it is currently designed is overkill.
When Apple first introduced Encrypted Backups several years ago, they were heavily pushed - other forum members may not remember that, but they were. I didn't use them at first, but eventually gave in to the "nagging" by Apple to enable them.
When I look at the help pages now, there are huge warnings about not forgetting your password. I do not recall them being so explicit when I enabled the feature, as I'd like to think I'd have been more careful were that the case.
I can understand the importance from a restore point of view, but until now it hadn't registered with me that I can't even turn off the feature without the password.
I have not used that password once since I set it up so, in my opinion, it'd be a better system to have 2 passwords.
One password that is created when you enable encrypted backups that is solely used for the restoration of a backup. If you forget that, you can't restore - fair enough.
The option to turn the feature off, however, should be like all of the other secure areas of iTunes and be controlled by your AppleID password.
I'm less likely to forget that as, even in the days of TouchID, I still use that password more frequently.