Thank you for contacting me about plans for a ‘breathing space’ for people in debt.
My heart goes out to all those who are currently struggling with debt and the stress and anxiety it causes.
Problem debt is often difficult to escape and can have a devastating impact on existing issues including family problems and poor mental health. It is only right that people who fall into problem debt are helped to find a sustainable, long-lasting plan to solve their debt problems. That is why I welcome the action being taken to protect those who find themselves in problem debt through a new breathing space scheme.
This scheme will have two parts; a breathing space period and a statutory debt repayment plan. Together, these two aspects of the scheme will protect debtors from creditor action, help them get professional advice on their debt problems, and help them pay off their debts in a sustainable way. Colleagues in the Treasury have already started work on this scheme by investing an additional £12.5 million in throughout 2020-21 in order to implement breathing spaces as soon as possible.
The breathing space will provide debtors with a 60-day period in which interest and charges on their debts are frozen and enforcement action from creditors is paused. During the time, debtors will have to seek professional debt advice to find a sustainable solution, encouraging them to seek advice earlier and give them the headspace to identify the right debt solution for them. The statutory debt repayment plan is a new debt solution that will extend the breathing space protections to debtors who commit to fully repaying their debts in a manageable timeline.
On the wider issue of helping those who find themselves in problem debt, I am glad that an extra £37.8 million support package has been made available to debt advice providers this year and the government-commissioned Money Advice Service is spending over £56 million to provide debt advice to over half a million people in the same period. Free debt advice is available from the Money Advice Service at www.moneyadviceservice.org.uk/en/tools/debt-advice-locator.
Reset the Debt: I applaud the Reset the Debt campaign for their work to raise the profile of issues surrounding the household debt which has accumulated during the pandemic.
The breathing space and statutory repayment plan which the Government is providing for will help protect individuals and families through this crisis and I know this work will intensify into 2021 and beyond, drawing on the input of civil society and campaigns such as Reset the Debt.
The assistance provided by the extension of the Job Retention Scheme, the Self-employed Income Support Scheme Grant Extension and changes to Universal Credit and Statutory Sick Pay are all designed to help people through these unprecedented circumstances.
Breathing Space: Landlords - I understand concerns about the impact the breathing space scheme could have on landlords. I am, however, reassured that the scheme's focus on creating time to find sustainable means of solving debt problems is designed to be fair to both tenants and landlords.
Debt Relief Orders: Debt Relief Orders (DROs) are valuable tools which provide relief to those with low levels of unmanageable debt, limited assets and minimal surplus income. A DRO is designed to be an easily accessible means of managing debt, delivered in partnership with the professional debt advice sector to protect people from creditor action. After 12 months, all debt within the order is written off.
I welcome Government plans to increase the financial eligibility criteria for DROs to ensure that vulnerable people are helped in getting to grips with problem debt. I know my ministerial colleagues are committed to ensuring that this help reaches as many people as possible and I will continue to engage with them on this matter.
Coronavirus: Council Tax - I realise that many people may be facing financial difficulties, which is why council tax support schemes are in place to help local residents struggling to pay their full council tax bill, reducing the financial burden for almost millions of people across England. A further £500 million has been provided through the Hardship Fund to help vulnerable people during the coronavirus outbreak.
Coronavirus: Rent - Decisive action was also taken to protect renters during the coronavirus outbreak by introducing a six-month moratorium on evictions in England and suspending housing possession proceedings. The ban on evictions provided security for millions of people at a time when many were struggling to make ends meet.
Coronavirus: Utility Bills - I welcome that, in March 2020, the Department for Business, Energy & Industrial Strategy secured an agreement with energy companies in order to support households impacted by the pandemic. The agreement saw that based on individual circumstances companies would reassess, reduce or pause debt repayments for those in financial distress. Companies also agreed to refer customers who were struggling to pay their bills to third party debt advisors.
Thank you again for taking the time to contact me.
Craig Whittaker MP