Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020

Lord Tunnicliffe Excerpts

Tuesday 6th October 2020 Lords Chamber

[Lord Tunnicliffe (Lab) [V]]

My Lords, as ever, I am grateful to the Minister for introducing these important regulations and to all noble Lords who have taken part in the debate. It is a good illustration of the breadth knowledge of the specialist areas that we find in our House, and the extent to which there has been consensus on this matter is gratifying.

I also express my gratitude to the Secondary Legislation Scrutiny Committee, which brought a previous iteration of this instrument to the attention of the House. It has since engaged in correspondence with the Treasury regarding its plans for effective signposting to the new measures, as acknowledged in the committee’s 27th report and paragraph 11 of the Explanatory Memorandum.

These regulations are an example of the value that your Lordships’ House brings to the scrutiny of legislation. My noble friends Lord Stevenson of Balmacara and Lord Mackenzie of Luton, and several others, took up this cause during the passage of the parent Act. It is to the Government’s credit that they heard and accepted the arguments, bringing forward their own amendments on Report. Given the volume of legislation that we are currently dealing with, perhaps the Minister could remind his colleagues that good things can come from having an open mind and working together.

The breathing space scheme introduced by this instrument has been long championed by organisations such as StepChange. It is based on a successful scheme that has been working in Scotland for a number of years and is designed to offer people with unmanageable problem debt greater access to the financial advice they need—and at an earlier stage, too. We are delighted to note that the Government accepted the views expressed by virtually everyone they consulted on the draft regulations and agreed to include in the scheme all unsecured debts, including those owed to the Crown. There is also a welcome focus on special support for those who suffer from mental stress as a result of their debts. This will make a huge difference, particularly as the pandemic continues.

Implementing a 60-day freeze on charges, fees and certain forms of interest, as well as a pause in enforcement action, will provide valuable time for advice to be sought, provided, considered and ultimately acted upon. It seems obvious to say it, but complex debt cases take time to resolve. Recognition of that will, I hope, lessen the stress and anxiety faced by those who feel that their situation is spiralling out of control. Dedicated provisions for those experiencing a mental health crisis are particularly important. The taking into account of treatment lengths and recognition that mental health problems often recur undoubtedly strengthen the scheme. I hope that we will see such issues considered in future policy-making.

The impact assessment published alongside the instrument makes clear the scale of the problem. Out of 9 million overindebted people in the UK, just over 1 million seek and receive advice each year. Estimates suggest that between 650,000 and 2.9 million people would benefit from debt advice but do not actively seek it, often due to the stigma of problem debt. The impact assessment suggests a clear net benefit to society, and the regulations include five-yearly reviews. Although it will clearly take some time to assess the full impact, can the Minister indicate whether the department plans to publish any interim analysis before 2026? This new scheme will undoubtedly help to encourage more people to seek help, but the problem of stigma requires further work. Is the Minister able to comment on the steps being taken?

Ministers have met their target to launch the new scheme in May 2021, which is to be welcomed. We could perhaps have arrived at this destination at an earlier date—the parent Act received Royal Assent back in May 2018. Earlier publication and consideration of the detail would also have afforded financial institutions additional time to prepare.

We all agree that the new scheme will be of significant value, but we must also be mindful of the fact that it is only one part of a very complex puzzle. As noted in the Explanatory Memorandum, plans to introduce the option of a statutory debt repayment plan are ongoing. I wonder whether the Minister will feel able to go beyond the contents of paragraph 2.1 of the EM by naming a target date for the SDRP to be introduced.

I will end with a brief comment on the timing of this instrument, which is hugely symbolic, if coincidental. Covid-19 and the economic challenges that it has presented have forced millions of people to deplete what little savings they had, and in many cases to take on personal debt. I raised this point in the recent Private Notice Question on personal savings.

Although it is good that we have reached this important milestone, we must also acknowledge the challenges that lie ahead. Unemployment is likely to rise in the coming months and this could have a profound impact on levels of personal debt. I hope the Minister can reassure the House that the Treasury is not only aware of this risk but proactively considering how to mitigate it.