Last week, I led Labour’s response to a government announcement of a policy to introduce a “breathing space period” for people who find themselves drowning in personal debt, a policy area I have done considerable work on in my brief, and which we broadly welcome.
For some time, I believe there has been a growing consensus that there is a need in England and Wales for something which is less dramatic than formal insolvency proceedings, but which does offer hope to people with problem debts that there can be a way out of them. That’s what the Breathing Space scheme should be. A space to let people get back on their feet, perhaps overcoming a health issue or a period of unemployment, or something else which has adversely affected their lives. There will always be disagreement between ourselves and the Government, especially on the necessity of harsh austerity policies which have blighted the country since 2010, but no-one can deny household debt in the UK is large, it’s growing, and for many people – it’s problematic. The big change I have seen in my own constituency is people not just using credit to buy a car, or a new sofa or a washing machine, but using short-term credit to pay their living costs at the end of the month. For food, dinner money, and children’s clothes. And the worst is when people, unable to take control of their affairs, go from one short-term credit product to another, compounding the costs and liabilities they are incurring, sometimes ending up in hoc to illegal money lenders as the only option they have left. One of my constituent’s ended up suicidal as a result. So we want this policy to work.
The questions I had for the minister were in that spirit. Firstly, I asked him about the time period that has been selected. Why 60 days? Going back to that point about the need to let people overcome whatever problem they have faced, I’ve always felt that might need to be longer. Secondly, will all debts be covered, including public sector debts like council tax arrears? Council tax arrears are one of the biggest causes of the bailiffs being called. We need them included too. Lastly, I asked the Minister to look specifically at the issue of Guarantor loans. These are loans where another person, typically a family member, accepts joint liability for a debt. I had another case of this type from a constituent in Stalybridge just this week. If the Breathing Space period didn’t apply to these loans – the burden would simply pass and offer no relief – and that would be counterproductive.
Ultimately, this policy will only work if there are sufficient sources of advice and support for people to access during the Breathing Space period. And it is a reality to say those services – Citizens Advice Bureaux, local authority and housing association advice centres and so on –have been put under massive strain over the last few years. I asked what strategy has the Government got to significantly improve the capacity in this area; whatever initiatives have been pursued to date, there is no doubt we need to go further.
Finally, in the famous words of Archbishop Desmond Tutu, “There comes a point where we need to stop just pulling people out of the river. But to go upstream and find out why they’re falling in”. As well as a change of economic policy, we believe it’s time to regulate further the interest that can be charged on overdrafts and credit cards, to look at the marketing of credit to vulnerable people, and to introduce real and effective financial education in schools. There is a lot to do, and I will keep challenging the government whilst it provides relief with one and piles on pressure with the other.