Gareth McNab
'Breathing Space' debt protection to go ahead

Last week marked a milestone that debt charities and consumer groups have been working towards for years – John Glen MP, the Chief Secretary to the Treasury, announced the Government’s (nearly) final plans for a Breathing Space for people in problem debt to gain initial protection for 60 days from debt collection and bailiffs while they seek debt advice, and a Statutory Debt Repayment Plan (SDRP) to help them pay their debts off over time with the confidence of consistent treatment by all creditors. In his words, “a new scheme, giving everyone access to the advice, time and support they need to both get their finances under control and get away from the perpetual stress and worry debt can cause”.

But why is this important? There are two big reasons:

1) The protection from interest, charges and enforcement action (county court judgments, evictions and bailiffs) should serve two purposes – firstly, to ensure that people who seek debt advice can expect their situation not to worsen while they engage with that advice and work towards a solution to their debts. It is no help to anyone if the balances a client gives an advisor at the first meeting are inaccurate by the time they try and enter a debt solution, or if everything gets turned upside down by a bailiff visiting during the process.

Secondly, the hope is that the more protections debt advice can afford to potential clients, the more likely it is that people will seek help more quickly. Statistics from the Money & Pensions Service show that up to 9 million people in the UK are overindebted (have missed 3 payments in the last 6 months or would describe their debts as a heavy burden), of whom only 1.1 million have sought debt advice in the last 12 months. And of those, the vast majority waited more than 6 months to seek advice after first realising they were in difficulty, with many taking more than a year to get help.

More people need more help more quickly, and the greater the benefit of getting advice, the more likely they are to seek it.

2) The involvement of all types of creditor is a major breakthrough – as well as the credit cards, loans and overdrafts that used to make up the majority of a debt advisor’s caseload just a few years ago, the rent arrears, council tax arrears, and benefit overpayments that have become the main driver of today’s increased caseload are now all to be included.

Government debt can be some of the most aggressively collected, with bailiffs appointed after cursory contact attempts, and benefit deductions set at levels that no financial services firm would be allowed to consider affordable. But the breathing space scheme will give people 60 days’ protection from these methods while they seek debt advice, and the SDRP will give the opportunity to enter into sensible, affordable, long term payment arrangements that should be more manageable for families whose finances are already on a knife edge.

There’s lots more work to do in ironing out some of the detail – government will work with charities and other organisations to be able to get to lay the legislation at the end of this year, so that Breathing Space can start in early 2021, and the SDRP in 2022. In the meantime, there are two big challenges that need particular attention:

1) Demand for debt advice already significantly exceeds supply, and things are getting harder in debt advice agencies across the country. While the sector is working to apply the efficiencies demanded of it in a recent independent review, and there is some extra funding coming via an increased levy on the banks, this isn’t enough for the demand we have today, yet alone the increased numbers of clients who will hopefully want to make use of the protections afforded to be able to break free from the burden of debt. The funding of free debt advice must be looked at again, and urgently, if the sector is to be able to cope with the additional clients and the additional work that new schemes will inevitably create.

2) We are familiar with the pain that Universal Credit causes claimants, and so we are thrilled to see that benefit overpayments and benefit deductions, including for UC advances, are to be included in both the Breathing Space scheme and the SDRP. Repayments of overpayments over longer periods of time, after having properly assessed a client’s affordability, is going to be significantly better than the misery and hunger that benefits deductions currently contribute to. However, the software behind Universal Credit is apparently not going to be compatible with Breathing Space and SDRP in time for their launch, so UC claimants will have to wait an unspecified period of time before they receive the same protections as any other person in financial difficulty.

This just isn’t right, and is another example of where a benefits system intended to keep people afloat during times of difficulty instead sweeps them into poverty and denies them the protections that others get automatically. We want to see a commitment to UC being included from the very beginning of Breathing Space so that John Glen’s comments can be realised fully – that “no one should be stuck in an endless cycle of debt and facing the ever-looming threat of invasive debt collectors”.

Read the Government's information on the Breathing Space scheme here.

Gareth works at Nationwide Building Society, and describes his work as helping people understand more, care more, and do more about the lives lived by those in debt and poverty. He’s worked in the field for more than 12 years, combining practical experience with policy expertise.

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