What is the Conservative Manifesto offering to people in debt?
By Mark Haslam, Public Affairs Officer
Yesterday the Conservative Party launched its 2017 General Election manifesto.
Which of their proposals will help those struggling with problem debt?
Breathing Space for people in serious debt
The Conservative Party is promising a Breathing Space scheme for people in serious debt. This is similar to a commitment in Labour’s manifesto and a policy we’ve long campaigned for.
It’s welcome news indeed. We’ve championed the need for a new statutory scheme that would give a better guarantee of protection from further interest, charges, collections and enforcement action that make debt problems worse and hinder recovery from financial difficulties.
In Scotland, the existing Debt Arrangement Scheme provides these protections and a similar scheme would improve the help we can give to people elsewhere across the UK.
Why is Breathing Space needed?
Our evidence suggests temporary financial difficulties are all too often driving people into a deeper debt crisis. A sudden shock to peoples’ incomes — from job loss, relationship breakdown or ill health — can be compounded by a lack of effective protection from the drivers of worsening debt.
Aggressive creditor action, mounting charges, and pressures to make unaffordable repayments, compounds debt problems. This leads to people taking out more and more dangerous credit and falling further behind on bills. More harm and hardship is the result.
What could be the impact?
The evidence from Scotland suggests that a guaranteed Breathing Space protection will help people in short-term difficulties stabilise their finances, keep up with their bills and give the best possible chance of financial recovery.
We’ll be watching carefully to ensure the details of any new scheme are right, so that it delivers all the benefits it can.
An energy price cap
Another headline from the Manifesto is the proposed energy price cap. The Conservatives had touted a market-wide price cap, based on the way limits for pre-payment meters(PPM) have worked — as a safeguard against higher bills.
However, the idea of a market-wide cap has proved controversial and the Manifesto gives the Party wiggle room, saying that the PPM cap will be extended to “more” customers on the poorest tariffs. That’s “more” not “all”.
That said, with energy market competition failing to deliver benefits to people most vulnerable to fuel debt, policy action to keep bills affordable would be welcome.
Putting vulnerable customers first
The Conservative Manifesto talks about intervention to ensure markets work well. Part of this is a commitment to look at a new a duty for regulators to weigh up the needs of vulnerable consumers.
We’re interested to see how this develops. Key regulators have been looking at vulnerability — both the FCA in its Mission, and Ofgem in its vulnerable consumers work. However, we share concerns that current approaches to cost-benefit analysis are missing the needs of vulnerable customers which are too often discounted.
We believe regulators need a sharper focus on customer vulnerability to make sure people most in need of protection get it — so this would be welcome.