Question to the HM Treasury:

To ask Her Majesty's Government what assessment they have made of increasing levels of debt in low-income families; and what steps they are taking to help such families manage their debt.

The Government regularly monitors trends in household debt levels in order to inform its policy making to help people manage their money well and access support if they need to get their finances back on track. It does so by working closely with the Money and Pensions Service (MaPS), the Financial Conduct Authority (FCA) and engages regularly with a range of other stakeholders on their research and findings.

The latest findings from the FCA’s biennial Financial Lives Survey were published in February 2021 and showed that between March and October 2020, the number of people with low financial resilience increased by 3.5 million, from 10.7 million to 14.2 million. MaPS monitors financial difficulty through the Debt Need Survey of approximately 22,000 people, with data on regional levels of over-indebtedness last published in 2018. MaPS will publish the results of the 2021 Debt Need Survey early next year.

The Government is strongly committed to supporting the financial wellbeing of the most vulnerable in society, and to tackling problem debt. This is why the Government put in place an unprecedent package of support to help people during the COVID-19 pandemic.

However, the Government recognises that the full impact of the pandemic on people’s personal finances is still unfolding and that some require extra support at this challenging time. To help people in problem debt get their finances back on track, the Government agreed to maintain record levels of funding for free-to-consumer debt advice in England in 2021-22, bringing this year’s debt advice budget for MaPS to £94.6 million. This is a more than 70% increase since 2019-20 to help more people who are struggling with their finances during the pandemic.

In addition to this, the Breathing Space scheme launched in England and Wales, offering people in problem debt a pause of up to 60 days on most enforcement action, interest, fees and charges, and encouraging them to seek professional debt advice.

The Government has also changed the existing monetary eligibility limits for a Debt Relief Order in England and Wales; increasing the value of assets that a debtor can hold, the level of surplus income received and the total debt allowable. This will give more people with low levels of assets and low income who are in problem debt access to a suitable and proportionate solution.