I begin by thanking the Minister for his courtesy in giving me advance notice of this statement, which we broadly welcome. There has been a growing consensus for some time about the need for something less dramatic than formal insolvency proceedings which offers hope to people with problem debts that there can be a way out. That is what the breathing space scheme should be—a space to let people get back on their feet, perhaps overcoming a health issue, a period of unemployment or something else that has adversely affected their lives.
There will always be disagreement between the Opposition and the Government on the necessity of the austerity policies that have blighted the country since 2010, but no one can deny that household debt in the UK is large, growing, and problematic for many people. The big change that I have seen in my constituency is that people are using credit not just to buy a car, a new sofa or a washing machine, but to pay their living costs at the end of the month—for food, dinner money, and children’s clothes. The worst is when people, unable to take control of their own affairs, go from one short-term credit product to another, compounding the costs and liabilities they are incurring and sometimes ending up in hock to illegal moneylenders as the only option they have left. One of my constituents in such circumstances ended up suicidal.
We want this policy to work, and my questions for the Minister are in that spirit. First, can he say why a 60-day period has been chosen as optimal? Going back to the need to let people overcome whatever problems they face, I have always felt that the period may need to be longer.
Secondly, will the Minister confirm my understanding that all debts will be covered, including public sector debts like council tax arrears and benefit overpayments? I very much recognise the obliteration of local government finances over the past nine years and, alongside colleagues, I presented a petition to Downing Street this morning on how bad it has been for councils like mine in Tameside. Council tax arrears are one of the biggest causes of the bailiffs being called, and we need such arrears to be included, too.
In addition, will the Minister look specifically at the issue of guarantor loans? Under such loans another person, typically a family member, accepts joint liability for the debt. I had another case of this type from a constituent in Stalybridge just this week. If the breathing space period does not apply to these loans, the burden will simply pass and offer no relief, which would be counterproductive.
Ultimately, this policy will work only if there are sufficient sources of advice and support for people to access during the breathing space period. It is a reality that such services—citizens advice bureaux, local authority and housing association advice centres, and so on—have been put under massive strain over the past few years. So what strategy do the Government have to significantly improve the capacity in this area? Whatever initiatives have been pursued to date, and whatever merit they have, there is no doubt that we need to go further.
Finally, in the famous words of Archbishop Desmond Tutu:
“There comes a point where we need to stop just pulling people out of the river. We need to go upstream and find out why they’re falling in.”
As well as a change of economic policy, we believe it is time to regulate further the interest that can be charged on overdrafts and credit cards, to look at the marketing of credit to vulnerable people, and to ensure there is real and effective financial education in schools.
There is a lot to do. This statement is a move in the right direction, but let us make sure we keep going in that direction.