To ask Her Majesty's Government what assessment they have made of the effect of increases to the cost of living on problem debt for those in the bottom 40 per cent of equivalised household incomes; and what steps they are taking to protect such households from problem debt.
1 August 2022
The Government is committed to monitoring and understanding personal debt levels in the UK, including the impact of cost-of-living pressures, and help individuals access appropriate guidance and support if they need help to get their finances back on track. Different organisations measure and define ‘problem debt’ in different ways. The Government monitors personal debt levels by working closely with the Money and Pensions Service (MaPS) , the Financial Conduct Authority and by engaging regularly with many other stakeholders on their research and findings.
MaPS undertakes an annual survey of Debt Need to understand how many people are facing financial difficulties and to better understand their characteristics, needs and preferences. The most recent survey indicated that 16% (around 8.5 million) of the UK adult population needed debt advice, with a further 20% (around 10.6 million) ‘at risk’ and likely to need help if their situation deteriorates.
To help people in problem debt, the Government continues to maintain record levels of funding for free-to-consumer debt advice in England in 2022-23, bringing this year’s debt advice budget for MaPS to over £90 million.
In addition to this, the Government launched the Breathing Space scheme in England and Wales last year. The scheme gives eligible people in problem debt who receive professional debt advice access to a 60-day period in which enforcement action is paused and most fees, charges and interest are frozen. Mental Health Crisis Breathing Space is an additional strand of Breathing Space that enables people receiving mental health crisis treatment to access the protections of the scheme for the full duration of their treatment, plus a further 30 days. In 2021, MaPS set up a single point of entry for the service and commissioned a dedicated pilot, delivered by Rethink Mental Illness.
The Government also continues to develop the Statutory Debt Repayment Plan (SDRP), a statutory agreement that will enable a person in problem debt to combine their debts into a single repayment plan, with payments made over a manageable time period, while receiving legal protections from creditor action for the duration of their plan.
To help people access debt advice, MaPS launched MoneyHelper in 2021, a consumer-facing service which provides free and impartial guidance for people across the UK. This includes budget planning and bill prioritiser tools, practical tips for engaging with creditors and a Debt Advice Locator Tool, which helps people find free, high-quality debt advice in their local area or via telephone and online.
MaPS has also developed the Money Advisor Network pilot which enables a range of organisations including Job Centre Plus, local authorities and financial service providers to refer people for free to MaPS funded debt advice. The individuals referred can either proceed immediately to debt advice, request a call-back at a more convenient time or schedule an in-person appointment.