Tackling problem debt must be high on the agenda for the next Government

By Richard Lane, Chief Client Officer

As a debt advice charity, it’s no surprise that in the run up to the General Election we’re asking all political parties to commit to delivering improvements to help people experiencing problem debt. Here are our top four asks, and the reasons for them.

Housing security for private tenants

Over a third of British households now live in the private rented sector, and many of them have similar financial characteristics to those living in the over-squeezed social rented sector. Yet while the characteristics of tenants in these two sectors have been becoming more similar, the protections available to them have not.

Despite the current government’s attempts to reform the security of private tenants through the abolition of “no fault” Section 21 evictions, private tenants are still often paying an eye-watering proportion of their income on rent, leaving them unable to build up the rainy day savings that might enable them to build up their financial defences to potential financial shocks. If and when shocks do occur — such as Covid, or the cost of living shock that has affected people over the past couple of years — maintaining rent payments can be a real struggle.

Around a third of private tenants over the past year have borrowed to maintain their rent payments (a higher proportion than in other housing tenures). If and when this financial pressure finally tips over into rent arrears, private tenants are at the bottom of the pile in terms of the protections afforded to them. Unlike both mortgage holders and social rented sector tenants who fall behind on their payments, they have no protection from eviction in terms of discretion from the courts. Mortgage lenders and social landlords must demonstrate that they have taken specific steps to try to help, and to ensure that eviction is a very last resort; private landlords do not have to evidence such attempts to the court. This needs to change.

Bailiff regulation

The debt enforcement sector has long been problematic. Not only is there a misalignment of behaviour incentives with good consumer outcomes (with bailiff fees racking up and charged to debtors for every individual piece of activity undertaken), but there is also evidence of over-use of enforcement activity in situations where it simply isn’t going to work as people cannot pay, and continuing evidence of poor and intimidating practices that harm vulnerable people.

The establishment of the Enforcement Conduct Board as a new oversight body for the bailiff sector is a step in the right direction. A statutory regime is necessary to deliver on the promise of this new approach. It would give the ECB the full legal powers and independence it needs to set standards and tackle unacceptable behaviour.

With four million people facing bailiff action every year — often at the behest of local government for council tax arrears — it should be a matter of priority in the next Parliament to give statutory backing to a fit-for-purpose system of regulation. It shouldn’t be controversial to want to ensure that rule-breaking bailiffs and the firms who employ them face proper consequences and cannot continue to operate without proper oversight and penalties for poor behaviour.

Improve household financial resilience and support

We’ve known for years that most people who experience problem debt do so as a result of unforeseen shocks. This is combined with the increasingly unaffordable cost of essentials that leaves those on the lowest incomes with limited coping strategies beyond harmful credit use. This has been badly exacerbated in recent years as a result of the knocks to income and higher bills that people have experienced through the Covid and cost-of-living crises. So it’s vital that the next Government adopts policies that will help households build financial resilience, and support them through difficult times. Specifically, we want the next Government to:

· Expand the Help to Save scheme to help households build a ‘rainy day’ fund

· Widen the scope of social tariffs, to increase support for the costs of energy, water and broadband

· Restore the Council Tax support scheme for struggling households

· Urgently invest in the benefit system, only allow affordable benefit deductions, and reform government debt collection.

Debt advice sector support

People experiencing problem debt who seek help need access to high quality advice and effective solutions to resolve their problems. At the moment, both are under pressure and need Government commitment to resolve.

A clear long-term strategy is needed to ensure safe access to debt advice and debt solutions for everyone that needs help. To support the strategy, funding for debt advice should be increased by ensuring all sectors that benefit from advice, including utilities and the public sector, contribute funding.

Policy makers have made good progress in improving access to debt solutions by introducing the statutory Breathing Space Scheme and removing Debt Relief Order fees. But more needs to be done to create an accessible, joined up, non-stigmatising debt solutions landscape.

Alongside a new advice strategy, the next government should support reform and modernisation of the personal insolvency framework begun by the Insolvency Service. This should include extending the Breathing Space scheme and re-starting work on a practical statutory debt repayment scheme. It’s also vital that people seeking help with debt aren’t vulnerable to the wild west of online and social media scammers, with action taken to stop harmful and misleading debt advice and solution ads.

An opportunity for change

We’re ready to work closely with whoever forms the next Government who have a real opportunity to tackle problem debt, and the harm it causes, right across the UK. With action taken swiftly, the cost of living crisis does not have to cast a long-shadow for years to come. In the coming weeks, we’ll be encouraging all parties to adopt these positive steps, that collectively can deliver much to help support individuals and lift the scourge of unmanageable problem debt.