What is the Labour Manifesto offering to people in debt?

by Joseph Surtees, Senior Public Policy AdvocateThis morning Labour launched its 2017 General Election manifesto.Which of its proposals will help the 2.9 million people struggling with severe debt problems right now?Action to tackle problem debtThe most interesting policy from our perspective is that Labour is committing to introducing a ‘Breathing Space’ scheme in England and Wales (pg. 40).This is a policy we’ve long campaigned for, to deliver effective practical support and reduce the harm debt can cause to struggling households. There’s little detail in the manifesto on what a scheme would look like under a Labour government. However, our work has shown that an ideal scheme would provide:protection against further interest, charges, collection and enforcement action for up to one year while people benefit from debt advice, so they can stabilise their financial situation and start to resolve their debts; andcontinuing protection from further interest, charges, collection and enforcement action where people are keeping up agreed affordable debt repayments.A scheme designed in this way would have a hugely positive impact for struggling households. When we surveyed our clients, 60% said that their financial situation had stabilised once all of their creditors agreed to freeze further interest, charges and enforcement action. None said their financial situation had stabilised in cases where none of their creditors had agreed to give them this help.We hope that a new Breathing Space scheme to protect people struggling with their debts will be implemented by the next government — whichever party triumphs at the polls on 8 June.Energy pricesThe Labour Manifesto promises a reduction in energy prices by introducing an emergency price cap so the average dual-fuel household energy bill remains below £1,000 per year (pg. 20).It’s clear this could appeal to clients struggling with energy costs.Between 2012 and 2016 the number of our clients who had arrears to their gas supplier went up from 12,356 to 20,874. Over the same period the average amount they owed increased from £455 to £553. With electricity bills the situation is similar.Energy market competition isn’t delivering benefits to people most vulnerable to fuel debt, so policy action to keep bills affordable is welcome.Universal CreditDebt advice organisations have long expressed concern about the Universal Credit (UC) programme. Although in many ways UC should be an improvement, administrative problems mean that it currently causes harm to many of the people it is supposed to help.We’ve been worried about the length of time claimants have to wait before receiving UC after application (a minimum of 42 days) and the levels of rent arrears deduction UC allows. Both of these features have the potential to force struggling individuals into debt and then reduce their living standards to an unacceptable level.Although the Labour Manifesto does not contain specific proposals on changing the latter, it does commit to reforming and redesign Universal Credit, including “ending six-week delays in payment” (pg. 56). We hope that whatever party forms the next government makes a similar change, while looking at the issue concerning rent arrears deductions.What else would we like the manifestos to say?We’re highlighting a number of other areas of policy action where we’d like to see commitments from all of the parties at this election.Safer and more sustainable creditFamilies turning to credit to meet the cost of essentials need access to safer and more sustainable credit options. There needs to be action to tackle harmful existing credit products, including an independent cap on unarranged overdraft charges that can be more expensive than payday loans.There also needs to be more affordable alternatives to high cost credit for these struggling families. The new Government should develop a new scheme of low and no interest loans for the most financially vulnerable families who struggle to safely access any form of commercial credit.Rainy day savings to protect against shocksThe likelihood of a family facing problem debt is cut by 44% if they have cash savings of £1,000. Helping every household to save this amount could reduce the number in problem debt by 500,000.The most effective way to get all families to this £1,000 would be to harness the existing pension auto-enrolment system, adapting it so pensions can include an accessible precautionary savings pot.Improve the conduct of public sector creditorsIn a 2016 survey, our clients said that public sector creditors were most likely to treat them unfairly. More than 40% said they were treated badly by a local authority creditor, and HMRC debt collection practices were rated no better than payday lenders.Government can help ameliorate this by addressing its own behaviour:Introduce an independent statutory regulator to raise standards among individual bailiffs and bailiff firmsIntroduce a statutory code for public sector debt collection