Joanna Elson, chief executive of the Money Advice Trust, shares her thoughts on today’s report of the Treasury Select Committee’s inquiry into household debt.
In today’s report on the state of UK household finances, the Treasury Select Committee has done a good job of putting the issue of high on the agenda in Westminster – where it belongs.
The report contains welcome calls to action across a range of really important issues affecting households in financial difficulty – including several issues we highlighted in our evidence to the Committee such as the need to improve public sector debt collection, expand access to affordable credit and crucially, and increase the supply of free debt advice for people in financial difficulty.
The Committee is right to highlight problems with public sector debt collection – and that central government departments, local authorities and other public bodies “should be leading by example in their treatment of the most financially vulnerable”. This is an issue that has attracted increasing scrutiny in recent years – not least through our latest Stop The Knock research on 2.3 million debts that were passed to bailiffs by local authorities in England and Wales in 2016/17, and the sector’s joint Taking Control campaign for reform of bailiff law.
The government has gone some way towards recognising these problems through setting up the cross-government Fairness Group, on which the Money Advice Trust is represented, and a new Ministry of Justice call for evidence on the impact of bailiff action. These are small positive steps – but the Committee is absolutely right to call for stronger action, and greater urgency. I am sure their very specific request for the Treasury to outlines its plans in this area in its response will not go unnoticed.
It is similarly pleasing to see the Committee back two important recommendations on the design of the Treasury’s planned statutory Breathing Space scheme – an element of flexibility for the period of breathing space the scheme offers can be extended beyond six weeks, and the inclusion of non-credit debts. We and other debt charities have been speaking to HM Treasury about these and other implementation issues in some detail, and the Committee’s comments on these aspects are helpful.
On access to affordable credit, the Committee has recommended that the government takes “a more strategic approach in co-ordinating what currently seem like piecemeal efforts” to support the credit union and community lending sectors. The new Financial Inclusion Policy Forum, of which I am a member, is looking at the issue of affordable credit and it is one that has increasing momentum.
Taken together with the FCA’s work on consumer credit regulation, action from the government action in these three specific areas would make a significant contribution to the fight against problem debt in the UK.
The bigger picture
The Committee’s report also puts its finger on one much larger problem, however – the fact that current supply of free debt advice is dramatically insufficient to meet demand. The report makes a strong call for the government and the new Single Financial Guidance Body to consider how the resources available for debt advice could be increased – including considering the case for extending the debt advice levy to non-credit arrears providers. With the UK’s personal debt landscape continuing its shift towards more arrears on household bills, and with demand only set to grow, this call is timely.
In fact, this ‘big picture’ recommendation from the Treasury Select Committee should be really seen in the context of another – that the government “needs to take full and active responsibility for helping households”, rather than relying solely on action from regulators and guidance bodies, with their more limited mandates and powers. This is an important statement for a powerful Committee to make.
On these big picture issues – as on many of the specifics – the Committee’s report is squarely on target. We look forward to the government’s response to this comprehensive report – and to discussing with departments and our partners how we can work through its important recommendations.