What can the next government do to help families in debt?

By Joseph Surtees, Senior Public Policy Advocate

Last week saw the release of Manifestos by the largest three political parties in the UK. We wrote about what each offered families struggling with debt (read our take on the Conservative, Labour and Liberal Democrat Manifestos).

There are parts of all three Manifestos we welcome. However, we believe all three parties could go further. Whoever wins on 8 June, problem debt is going to be a major issue.

2.9m people are struggling with severe debt problems right now. Over 9m more are showing signs of financial distress. So what should the new government be looking to do?

To start with they should read our full Manifesto briefing.

1. Access to safer and more sustainable credit

8.8m households are using credit for everyday living expenses, including 1.1m who have turned to high cost credit.

There must be further action to tackle harmful existing credit products and better alternatives to high cost credit, including:

· an independent and fair cap on unarranged overdraft charges.

· extending the ‘total cost cap’ principle from payday loans to other high cost credit products

· legislating to bring logbook lending up to modern standards of consumer protection

Provision of affordable alternatives to high-cost credit can be increased by:

· Government bringing together the investment and innovation potential of community lenders, other third sector affordable credit providers and accessible FinTech solutions

· Government introducing or underwriting the development of a new scheme for low and no interest loans and grants to help the most financially vulnerable

2. Help for households build rainy day savings to protect against shocks

The next Government should set a target to ensure all families have at least £1,000 in rainy day savings. Helping every household to save this amount could reduce the number in problem debt by 500,000.

Families can be helped to save this amount by harnessing the existing pension auto-enrolment system, adapting it so pensions can include an accessible precautionary savings pot.

3. Significantly improve the conduct of public sector creditors

In a 2016 survey, our clients said public sector creditors and the bailiffs who often act for them were most likely to treat them unfairly.

We’re calling on the next Government to significantly improve public sector creditor practices by:

· introducing an independent statutory regulator to raise standards among individual bailiffs and bailiff firms.

· this regulator should be accompanied by a free, clear, transparent and accessible complaints procedure for members of the public.

· introducing a statutory code for public sector debt collection to ensure that:

  1. Standards and oversight are raised to at least match those applying to consumer credit lenders
  2. Public sector creditors do not pass anyone for enforcement who has been assessed as being in vulnerable circumstances
  3. Good practice guidance for the collection of Council Tax arrears is legally binding upon local authorities
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