Six policies the Government should adopt to best support those in problem debt pt.2

By Sophie Morris, Public Affairs Advisor

Yesterday we outlined three of the six policy priorities we want the government to focus on in order to tackle problem debt and its effects. Here are numbers four to six:

4. Address drivers of debt in the new child poverty strategy

At StepChange, we know that poverty is the most significant driver of debt problems among families with children: 27% of people with children in receipt of means-tested benefits are struggling with serious problem debt. We therefore welcomed the government’s new Ministerial Taskforce to tackle child poverty and are advocating for the new strategy launching in Spring to adequately address drivers of debt to help families make ends meet. The new child poverty strategy should recognise the close link between poverty and debt problems, reading across to a new national financial inclusion strategy to help families build savings and access alternatives to unaffordable credit.

5. Develop a new financial inclusion strategy

UK households’ financial resilience has taken a major hit in recent years following multiple economic crises. Recent StepChange analysis of YouGov polling shows that 41% of UK adults are currently unable to meet all of an unexpected £1,000 expense without borrowing. In addition to low levels of financial resilience, limited access to affordable credit is meaning many are finding themselves having to turn to risky, high-cost products to cope with necessary household expenses — or finding themselves financially excluded from commercial credit options altogether.

We’re calling on the Government to develop a national financial inclusion strategy to help reduce financial exclusion and remove barriers to accessible and affordable financial products to help UK households rebuild their ability to weather financial shocks.

6. Support the debt advice sector to help more people

Debt solutions are a vital route out of problem debt, providing a fresh start and a safe protected space to repay debts. However, the current statutory solutions landscape is fragmented and does not work for everyone, leaving many without access to a suitable debt solution. Too many people seeking help with their debts online face a wild west of scammers, ads impersonating charities and debt solution providers operating to different consumer protection and redress standards.

We’re asking the Government to commit to a 10-year strategy to ensure safe access to debt advice and debt solutions for everyone that needs help. The strategy should create a safe pathway to debt solutions by bringing IVA providers within an effective regulatory framework and ramping up action to stop harmful and misleading online and social media debt advice and solution ads.

StepChange’s briefing document identifying the top policy priorities for the new Government to act upon to best support those in financial difficulty is available to read in full here.