#general-election

What do the parties’ election manifestos offer for people in problem debt?

By Grace Brownfield, Senior Public Policy Advocate, StepChangeWe’re now just two weeks away from Election day and each of the main parties has published their manifestos. We take a look at what they did, and didn’t, offer for people in problem debt.By the time the Westminster Parliament is back in full swing in January, StepChange will be in the midst of our busiest month of the year. January tends to see more people than any other month getting in touch for debt advice. This is the result of a perfect storm of factors such as the pressures of Christmas spending, people desperate to use the new year to get out of debt, and other life changes that cause financial difficulty (unemployment and relationship breakdown, for example, are common reasons for debt among our clients).It doesn’t take a political genius to predict that this election is being fought primarily on a few key issues: primarily Brexit and public spending on the NHS and education. However, for the over 3 million people heading into the new year in severe problem debt and the further 10 million starting 2020 showing signs of financial distress, the big question is what will the next government do to help them?The answer is, unfortunately, that the picture is mixed.The good newsThere are some welcome commitments littered through the main parties’ manifestos to improve the social security system — an important safety net that can, when it works properly, help people cope with life shocks and avoid problem debt.Labour pledged to remove the Universal Credit five-week wait, which we know is an avoidable driver of financial difficulty and hardship, as part of a package of reforms with a view to scrapping and replacing the benefit in the longer term. The Liberal Democrats said they would reduce the wait to five days and set out other measures to build “a safety net that works”. The Conservatives pledged to “do more to make sure that Universal Credit works for the most vulnerable” while the SNP said they would push for a halt to the roll-out, among other measures.We would welcome greater clarity on key issues like how social security payments will meet and keep pace with the cost of living, and how vulnerable people will be protected against unaffordable deductions from benefits to repay debt, and we will keep pushing on these issues post-election — but it is positive that all of the main parties acknowledge the need for change.The bad newsGiven the millions of people in debt now, it is disappointing that there was not more in the manifestos about how the parties plan to support people to get out of debt and to reduce the harm that it causes.To give credit where it’s due (excuse the pun), Labour said they would cap the total amount that can be paid in overdraft fees or interest on a loan. The Liberal Democrats, meanwhile, highlighted the link between mental health issues and financial difficulty, pledging to end threatening debt collection practices (although they did not go into detail about exactly what this meant). In Scotland, the SNP has pledged that the party’s MPs in Westminster would push for the payday loan cap to be lowered, while also extending it to cover credit card interest and unauthorised overdrafts.Our verdict? All the parties need to go furtherWe’re disappointed not to see more in the manifestos, but it shows us how much more we still need to do to push problem debt up the policy agenda.We want to see clear commitments to push forward with changes that could make a huge difference to people in debt: most notably for England and Wales, implementing a statutory breathing space scheme — giving people time to get help with their debts without being chased for what they owe — and introducing an independent regulator for the bailiff sector.Good progress on both of these issues has been made during the course of the previous Parliament. Both have strong cross-party support. Yet there is now a real risk that they get lost somewhere between this government and the next. This must not be allowed to happen.Breathing space and bailiffs — top of our listWe know that regulations to create a statutory breathing space scheme in England and Wales (Scotland already has a similar scheme) are drafted and ready to go. The next government must introduce these into Parliament as soon as possible, alongside legislation for accompanying statutory debt repayment plans.On bailiffs, it has now been over a year since the Ministry of Justice launched a Call for Evidence on bailiff reform, but it’s time to announce action as a result. We call on the next Justice Minister to set out clearly how the government intends to go about setting up a new system of independent regulation.What about Scotland?Those two provisions mainly apply in England and Wales. The picture is different in Scotland where a number of areas related to debt and advice are devolved. The Scottish Parliament elections in 2021 will therefore be a key opportunity to commit to progress on these issues.We continue to call for the development of a coordinated action plan for Scotland that addresses the impact of problem debt and alleviates hardship. Crucial to this is how Scotland can unlock increased funding for all channels of free debt advice, as well as ensuring Scottish debt solutions administered by the Accountant in Bankruptcy are fit for purpose and accessible for those that need them.Of course, manifestos aren’t the only way for the parties to promise action. We’ll continue to look to all parties to commit to offering much needed help to those facing the difficulties of debt right now. Come December 13th, the New Year and beyond, we’ll continue to make the case to whichever party forms the next government about just why this is so important.To find out more about what we’re calling on the next government to do to help people in debt, read our manifesto.

Breathing Space: keeping up the pace post-election

By Alison Blackwood, Senior Policy & Campaigns AdvocateAfter another surprising general election result, we’re still waiting to see how things will settle at Westminster. But what does that mean for those of us who are working to change policy to provide more support to tackle problem debt?One of the things we were very pleased to see in both Conservative and Labour party manifestos was a commitment to introduce a Breathing Space scheme in law, to support people in problem debt.A Breathing Space scheme would provide people who were receiving regulated debt advice with a guaranteed period of protection from further interest, charges or being chased for payments.This was something that our clients really pushed onto the agenda, when shortly before the election over 1,000 emailed their MPs asking for them to support such a campaign. As a result 50 MPs from across the political parties committed to publicly supporting such a scheme.Cross-party supportWhatever, the final decision on how the different political parties work together to govern, the need to help households struggling with problem debt could become an important part of any agreement. This is one area where we’ve already seen cross-party commitment, not only through the manifestos, but with support from MPs from a range of other parties as well.The Queen’s Speech, when the government introduces its plans for laws over the next Parliament, is now scheduled for 21 June. However, it’ll have to be approved for any new Government to continue. What better opportunity than to introduce legislation on something that already has wide cross-party agreement? This certainly improves the prospect of a Breathing Space scheme being included in any legislation introduced to support those in financial difficulty.We’ll keep pushingOver the next few weeks we’ll be doing everything we can to raise awareness of this opportunity with Ministers and MPs, both with those who have already pledged their support and with recently-elected MPs.Is this the moment we can stop holding our breath, and see some real progress in introducing this new support for people in problem debt?Please get in touch if you want to help us in taking this forward.

What can the next government do to help families in debt?

By Joseph Surtees, Senior Public Policy AdvocateLast week saw the release of Manifestos by the largest three political parties in the UK. We wrote about what each offered families struggling with debt (read our take on the Conservative, Labour and Liberal Democrat Manifestos).There are parts of all three Manifestos we welcome. However, we believe all three parties could go further. Whoever wins on 8 June, problem debt is going to be a major issue.2.9m people are struggling with severe debt problems right now. Over 9m more are showing signs of financial distress. So what should the new government be looking to do?To start with they should read our full Manifesto briefing.1. Access to safer and more sustainable credit8.8m households are using credit for everyday living expenses, including 1.1m who have turned to high cost credit.There must be further action to tackle harmful existing credit products and better alternatives to high cost credit, including:· an independent and fair cap on unarranged overdraft charges.· extending the ‘total cost cap’ principle from payday loans to other high cost credit products· legislating to bring logbook lending up to modern standards of consumer protectionProvision of affordable alternatives to high-cost credit can be increased by:· Government bringing together the investment and innovation potential of community lenders, other third sector affordable credit providers and accessible FinTech solutions· Government introducing or underwriting the development of a new scheme for low and no interest loans and grants to help the most financially vulnerable2. Help for households build rainy day savings to protect against shocksThe next Government should set a target to ensure all families have at least £1,000 in rainy day savings. Helping every household to save this amount could reduce the number in problem debt by 500,000.Families can be helped to save this amount by harnessing the existing pension auto-enrolment system, adapting it so pensions can include an accessible precautionary savings pot.3. Significantly improve the conduct of public sector creditorsIn a 2016 survey, our clients said public sector creditors and the bailiffs who often act for them were most likely to treat them unfairly.We’re calling on the next Government to significantly improve public sector creditor practices by:· introducing an independent statutory regulator to raise standards among individual bailiffs and bailiff firms.· this regulator should be accompanied by a free, clear, transparent and accessible complaints procedure for members of the public.· introducing a statutory code for public sector debt collection to ensure that:Standards and oversight are raised to at least match those applying to consumer credit lendersPublic sector creditors do not pass anyone for enforcement who has been assessed as being in vulnerable circumstancesGood practice guidance for the collection of Council Tax arrears is legally binding upon local authorities

What is the Liberal Democrat Manifesto offering to people in debt?

by Laura Rodrigues, Senior Public Policy AdvocateToday the Liberal Democrats launched their 2017 General Election manifesto.Which of their proposals will help those struggling with problem debt?Levels of problem debt and financial exclusionThe Liberal Democrats highlight some important statistics related to problem debt (pg. 44), including:· Around 8 million people are over-indebted· 40% of the working-age population have less than £100 in savingsThis echoes our research that shows over 9 million people are showing signs of financial distress and 2.9 million are facing severe problem debt.Recommendations to tackle problem debtTo tackle this, the Liberal Democrats commit to taking forward the recommendations of the House of Lords Select Committee on Financial Exclusion (pg.45) to help families struggling with problem debt.From our perspective, the main calls from this Committee were:1. The recommendation that the Financial Conduct Authority (FCA) should regulate to limit and manage the negative impact of unarranged overdraft charges.We’ve highlighted the significance of persistent overdraft debt. Over half our clients have overdraft debt and this can make up a large amount of their debt burden.The charges and interest associated with overdrafts can push vulnerable families into problem debt and exacerbate their financial difficulties. We’ve called for a cap on the maximum amount that banks can charge their customers for going over their overdraft limit.We’ve also proposed that banks should be doing more for those in persistent overdraft debt, by identifying where they’re struggling and offering them affordable ways to repay.2. The Committee recommended that the Government and FCA should take action to combat financial exclusion caused or exacerbated by high-cost credit.We’ve long campaigned for further effective action on high-cost credit. The recent regulation to the harm caused by payday loans, including the price cap, was welcome and has to a large extent been effective. However, there are other high cost products causing harm to struggling households.For example, rent to own agreements can see hard pressed households pay more than double for household goods compared to those who can shop in mainstream outlets. Logbook loan borrowers can end up repaying substantial amounts and still see their car taken away.We’ve called for the extension of the ‘total cost cap’ principle from payday loans to other high cost credit products, to protect borrowers from excessive costs.We also think there needs to be legislation to bring archaic logbook lending up to modern standards of consumer protection. There also needs to be more alternatives to high cost credit for financially vulnerable households.3. The Committee welcomed the Help to Save initiative and encouraged the Government to take account of suggestions for improvements to this scheme ahead its launch in April 2018.We agree with the Committee that greater access to ‘rainy day savings’ is essentially to building financial resilience among lower income families. The Help to Save scheme will go some way to addressing this but this is expected to reach around 500,000 of the 3.5 million people who would be eligible.We want the next Government to tackle this anticipated low take-up of Help to Save and ensure all those eligible have a strong financial buffer.

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