Posted May 4, 2021
In our latest blog post, our Chief Executive Joanna Elson CBE discusses the vital role that Breathing Space will play in supporting people in financial difficulty, and the further changes needed to the debt landscape to ensure everyone has access to safe routes out of debt.
From today (4th May), people with debt problems in England and Wales will start to benefit from the government’s new Breathing Space scheme, which represents a major milestone in the mission to provide safe routes of debt.
Today’s launch is the product both of years of campaigning – led by our colleagues at StepChange Debt Charity – and an enormous amount of hard work across the debt advice sector to improve, and then implement the scheme for our clients.
We are pleased that both National Debtline and Business Debtline will be playing important roles in delivering the benefits of Breathing Space to people in debt. Our Wiseradviser training is also playing a key role, in partnership with the Money and Pensions Service, in training money advisers across the sector in the operation of the new scheme.
What is Breathing Space?
Breathing Space is intended to give people time to seek debt advice and explore their options for a debt solution to be put in place, without the pressure and stress that collection and enforcement activity brings.
The scheme provides up to 60 days protection from most types of debt collection and enforcement activity, as well as the burden of extra fees and charges – all of which often serve to make debt problems worse for those who are struggling. People will need to keep up with their ongoing bills in most cases, and work with their debt advice agency to seek a debt solution.
Since a commitment to introducing Breathing Space was included in both the Conservative and Labour Party manifestos in 2014, we have worked hard to feedback at each stage of the policy process to ensure the best possible outcome for the people we support at National Debtline and Business Debtline. Following detailed consultations, the regulations going through parliament, the development of the scheme’s guidance and a great deal of work by the advice sector, credit industry, the Insolvency Service and HM Treasury, Breathing Space in its current form took shape.
Why is it important?
Importantly, the scheme means that – for the first time – people in debt will have a guaranteed, statutory route to have debt collection activity on debts owed to government, such as council tax, paused while they seek advice. The inclusion of debts owed to public sector organisations was a significant step from government – and is the most concrete example yet of progress in improving government’s debt collection practices.
We are particularly pleased that the scheme will be able to help our Business Debtline clients, with the scheme covering business debts for small sole traders who are not VAT registered – something we pushed hard for when the scheme was being developed.
Making sure the scheme works for people in debt
Throughout the process of campaigning for the introduction of Breathing Space, we have been working hard to ensure it works well in practice for people in debt, advisers and creditors.
However, as with any new and far-reaching policy change – in this case one that covers a significant number of different creditors – there will always be room for improvement. For example, Universal Credit Advances and third-party deductions from Universal Credit have not initially be included in the scheme due to technology issues. The Government has said they will come in as soon as possible after the scheme’s launch, and it is vital that they follow through on this commitment.
Ultimately, no scheme is perfect, but as it stands the introduction of Breathing Space represents a significant improvement upon what existed before. Furthermore, this signals a willingness by Government to make some changes to improve the situation for people struggling with problem debt. The chance to build on this can only be a good thing.
As with any new policy, is very important that the operation of the Breathing Space is subject to regular review to ensure that it is working as intended. We were pleased to see this process embedded into the regulations, and we look forward to continuing to work to make the scheme as effective as possible.
More improvements expected
Breathing Space is just one of a number measures needed to support people in financial difficulty, with Statutory Debt Repayment Plans (SDRPs) due to be introduced in 2024, in addition to welcome changes to the eligibility rules for Debt Relief Orders (DROs) expected shortly.
On Debt Relief Orders - we are all waiting for the Insolvency Service to announce the outcome of the recent consultation which could extend the financial limits for a DRO, particularly to allow debts up to £30,000 to qualify. We hope to see these changes come into force very soon, as they are intended to complement the introduction of Breathing Space and will play a vital part in the response to the Covid-19 pandemic.
On SDRPs, we are pleased that the Government has now committed to bring forward the necessary regulations by the end of 2022, with implementation of the scheme in 2024. The Financial Services Bill – which gives government the power to introduce SDRPs – completed its journey through Parliament last week, and as with others in the debt advice sector, our focus now will be on shaping the proposals to make sure they work as best they can to provide an effective new debt option for our clients.
How can the Government build on this progress?
Breathing Space, the introduction of SDRPs and urgent changes to individual insolvency options are all welcome steps toward better supporting people in financial difficulty, and we would urge the Government to make these changes as soon as possible.
However, without a broader look at the existing debt solutions landscape, and the barriers that persist for people seeking safe routes out of debt, these changes alone will not be enough.
The focus for Government now should be on undertaking an urgent review of the debt options available to people in financial difficulty, to ensure that no one is allowed to fall through the cracks in a framework that has evolved in a piecemeal fashion over several decades. We are pleased that the Scottish Government is taking a broad look at debt options – and Westminster now needs to follow suit.
Our recent briefing Debt options in the new normal sets out some changes to the debt options landscape that could be put in place.
For today – some welcome progress
For today, we should celebrate the launch of a scheme which will provide a powerful incentive for people in debt to seek free debt advice – with vital protections from interest, charges and creditor action giving people the time and space they need to begin to deal with their financial difficulty.
Free debt advice has never been more important than in helping households to recover from the impact of Covid-19 – and Breathing Space will strengthen our ability to help people at this crucial time. We look forward to playing our role in making the scheme a success.
Joanna is chief executive of the Money Advice Trust. Previously, she was Executive Director at the British Bankers' Association and a Parliamentary researcher and prior to that, a primary school teacher. She has a CBE for services to people in debt. View all posts from Joanna Elson.