Breathing Space Scheme

Kirsten Oswald Excerpts

Wednesday 29th March 2017 Westminster Hall

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I congratulate the hon. Member for Rochester and Strood (Kelly Tolhurst) on securing this debate, which is critical to many individuals and families. I also recognise her commendable work in initiating and progressing the Families with Children and Young People in Debt (Respite) Bill, which has the potential to form part of a much needed solution to the escalating levels of personal debt.

As several hon. Members have already outlined, we face a growing crisis with the levels of unsecured household debt. In January, the TUC released analysis that showed that it reached record levels in 2016, according to data provided directly by the Office for National Statistics. Total unsecured debt, which does not include mortgages, reached a record level of £349 billion during the third quarter of 2016. Unsecured debt per household increased to an average of nearly £13,000 in that quarter, which was an increase of more than £1,000 on the previous year and according to the TUC was the largest annual increase since 1997. As a share of household income, that represents an average of 27.5%, the highest figure for eight years.

It is clear to Opposition Members that the Government’s policies have created a perfect storm for those conditions to worsen. Weak wage growth has left many households struggling to get by as the cost of living continues to increase and the poorest continue to bear the brunt of Government cuts. It is therefore hardly surprising that personal borrowing has increased to fill the gap. As we have heard, sometimes people have no other option as a means of putting food on the table.

As we have said previously, the Government need to reassess their policy programme urgently, with specific consideration for the impact it has on the most vulnerable in society. However, in the interim, some sort of remedial approach is needed to give a helping hand to people who find themselves in a vicious circle of debt.

There is currently too great a gap between struggling with debt repayments and formal bankruptcy proceedings. Insolvency proceedings are typically suitable for only a small number of unmanageable personal debt cases. In particular, as my hon. Friends the Members for Makerfield (Yvonne Fovargue) and for Blackburn (Kate Hollern) said, a single event can often serve as the trigger for a spiral into debt problems. That is typically a change in circumstances such as family breakdown, redundancy or bereavement. The individual suffering from such problems can often be back in employment or have support from the welfare system arranged in a period of six months to a year, but at present the challenge of having to deal with the initial personal problems alongside that mounting debt can have an adverse effect on getting back into employment and cause serious mental health issues, which slows the process down. Those factors combined demonstrate that a breathing space scheme would help to alleviate the pressure on individuals while they get back on their feet.

[Kirsten Oswald (East Renfrewshire) (SNP)]

Does the hon. Gentleman agree that schemes such as the debt arrangement scheme that my hon. Friend the Member for Aberdeen North (Kirsty Blackman) spoke of are hugely important in alleviating the stresses and strains that impact on not only the family members who are dealing with the debt but the children themselves? If we do not put steps in place to try to deal with that, the impact on the children could be long standing; it could have a lasting effect on their life chances.

[Jonathan Reynolds]

I endorse those remarks in terms of what the objectives of such a scheme should be. We believe that, for it to be as effective as possible, the Government must undertake some further exploration of the technical details. In current versions of the scheme under way elsewhere, I understand that public sector debts such as council tax debt are excluded as well as self-assessment fines, benefit overpayments and so on. Those debts can often cause the most serious stress to individuals, so it is important to include those obligations alongside consumer credit.