Introducing Breathing Space for Those in Debt
Discover more about the UK Government’s plans for a new Breathing Space scheme for people and businesses with debt problems.
Introducing Breathing Space for Those in Debt
Money Advice Trust, the charity that runs National and Business Debtline, has been working with UK Treasury officials over the last year as they develop plans for a new Breathing Space scheme. The scheme will allow people with problem debt to be exempted from further interest, charges and enforcement action for 60 days while they receive debt advice.
Joanna Elson, Chief Executive, the Money Advice Trust, shares her thoughts on the government’s policy proposals.
There has been talk of a proposed Breathing Space scheme to help people in debt for a number of years now. So when the Treasury set out its plans in October last year to introduce such a scheme, we were pleased to see that aspects of its design were similar to what the Money Advice Trust laid out in a consultation response a year earlier (read a summary here and our full submission here).
Pleasingly, the scheme looks set to have a wide eligibility, with broad protections from interest, charges and most enforcement action – accessed via debt advisers using an online portal run by the Insolvency Service.
Extended protections
One important proposal is that the government has extended the time period of protections proposed in its manifesto commitment from six weeks to 60 days. This is hugely encouraging and should mean the scheme gives people in financial difficulty more time to start resolving their debt problems. We have been calling for the government to go further, by arguing for an element of adviser discretion. This would ensure the scheme also works for people with more complex situations. But a 60-day window is certainly progress.
We are especially pleased to see the inclusion of sole traders with business debts in the Treasury’s plans – a move we’ve been arguing for strongly. With demand for debt advice continuing to grow, this addition will be particularly significant for many of the people we help at our Business Debtline service.
While the signs are positive that the foundations of a successful Breathing Space scheme are taking shape, further detail in a couple of areas would be useful.
For example, there are mixed signals on whether public sector creditors including local authorities, HMRC and the Department for Work and Pensions will be included in Breathing Space.
We feel this is vital, as issues like council tax arrears are some of the most significant debts our advisers hear about. As a result, we will continue to make the case for a firmer commitment on this point.
Meeting increased demand
There’s also a question about the increased demand for free debt advice that a new Breathing Space scheme might generate. Demand already far outstrips supply, and with the operational burden likely to fall on debt advisers, what additional support will be provided?
The government has made clear in its proposal that no “specific new funding stream” will be introduced, with advice agencies instead expected to operate the scheme within existing funding. Clearly, this is something that needs further consideration.
Despite these caveats, our initial impression is that the Treasury’s proposal could deliver a scheme that is a genuine game-changer.
We look forward to engaging further with Ministers and officials, along with colleagues in the rest of the advice sector, as the new Breathing Space scheme progresses.
The Money Advice Trust is a charity founded in 1991 to help people across the UK tackle their debts and manage their money with confidence. The Trust’s main activities are providing free advice through National Debtline and Business Debtline, supporting advisers through Wiseradviser and improving the UK’s money and debt environment. In 2018, Money Advice Trust’s National Debtline and Business Debtline advisers provided help to nearly 200,000 people by phone and webchat, with 1.5 million visits to the Trust’s advice websites.
Read our feature on education and consumer debt in the latest issue of Chartered Banker magazine.
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