Problem debt: ‘room to breathe’ legislation designed to help families

31 Oct 2016

The recent launch of The Families with Children in Debt (Respite) Bill, from Kelly Tolhurst MP (Con, Rochester and Strood) has successfully reignited discussions about issues of financial health and debt in families. The Private Members’ Bill, launched with input from the Children’s Society and the Step Change Debt Charity, looks to reduce ‘unnecessary complications around getting the help and support needed to help people return to stability’. The Bill, which has received initial support from Labour MPs including Frank Field and Helen Goodman, aims to establish a ‘breathing space’ debt mechanism to encourage people, and in particular families, to seek advice before their debts become too difficult to manage.

In a recent report entitled The Damage of Debt, the Children’s Society examines the link between problem debt and emotional wellbeing of children and young people. In particular the report highlights how debt can make parents and young people feel anxious, out of control, ashamed and alone. “For me personally, much of my work has been around ensuring children can develop in the best possible environment, but within an indebted household, this is often not the case,” comments Tolhurst. “There can be a constant threat of losing the family home, family breakdown, and possibly violence. All of this can lead to children getting into similar difficulties that they carry forward into adulthood, repeating the cycle.”

Working examples of ‘breathing space’ mechanisms, such as the Debt Arrangement Scheme (DAS) in Scotland, are expected to be examined as the Bill moves towards Committee stage. DAS is a Scottish Government-run debt management tool, which offers debtors the chance to pay back their debts over an extended period of time, based on their disposable income. This gives debtors the ‘breathing space’ they need to catch up with the debts they owe; while creditors can expect more reliable payments and higher total returns. In England, debtors currently have access to Debt Management Plans through debt advice services, but these only serve non-priority debts, such as overdrafts and credit card loans.

Colin Kinloch, of the Money Advice Service, notes the significance of the Bill, commenting on the need to create ‘breathing space’ for people in debt: “It is vital that people in debt have time to get advice and find an appropriate solution, without unnecessary pressure from their creditors. We need a consistent process that looks at people’s financial situation as a whole, and this Bill is a good start.”

Economic Secretary to the Treasury, Simon Kirby, states that the Government notes the Children’s Society Report with interest, and is exploring whether some form of ‘breathing space’ would be a useful and viable addition to the ‘range of formal and informal debt solutions available to consumers and creditors.’ The Government is expected to discuss with key stakeholders, and will report back this autumn.

Follow the Bill through Parliament, here.