A Budget With Breathing Space For Debt
Ever since 2008 the big subjects at each budget has been the debt and the deficit. This time was slightly different, and although Universal Credit and “the end of austerity” will still be the big talking points of the 2018 Budget the interesting parts of the Chancellor’s speech were just hints of a policy designed to tackle problems of personal debt.
These announcements have barely made the headlines (and at the time of writing I can’t even find them mentioned on the BBC’s budget summary) but buried in the full budget document were ideas intended to address some of the problems faced by those either over-burdened with high interest loans or unable to access credit at all.
Under the heading of “Support for affordable credit” the government aims “to help households manage unexpected costs by increasing access to fair and affordable credit, as well as a consultation on a breathing space scheme for people who fall into problem debt.”
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Because it’s the government, this will all take some time to be realised, and as is the way with governments it’ll be announced half a dozen times more before it really happens. But included was a £2 million fund to promote Fintech solutions that support social and community lenders, a proposed “60-day period of protection from creditor action to recover debts to help people make plans to pay back their debts in a sustainable way”, and, possibly the most attention-grabbing, a pilot for a no-interest loan scheme for those who can’t afford any kind of borrowing. It follow a similar scheme in Australia where it helped “four out of five of those who took a no-interest loan to stop using payday loans.”
Slightly more off-the-wall was the aim to use £55 million from dormant bank accounts “primarily to address the problem of access to affordable credit.” That sounds a bit more like the salami slicing of Superman III than a responsible fiscal policy, but hopefully someone’s done the maths (and the legals).
The debt charity StepChange has welcomed the moves so far: “We’ll continue to campaign for improvements to help our clients and all those in problem debt. But for now, the Budget seems to have delivered some interesting proposals when it comes to problem debt and we stand ready to help make sure that they work in practice.”
All of these policies are in their early stages, and many of them are only just entering a consultation period, but they’re a move in the right direction. This comes in a week when StepChange’s 2018 mid-year review showed 18.3% of their clients had short-term high cost debt, up from 15.7% in 2015.
It’s a stark illustration that although regulation of payday lenders has tightened over the past few years, the damage continues. Despite yesterday’s announcements Debt Hacker still takes a strong line on the credit industry’s need to reform, but if anything announced yesterday helps people to escape the debt trap and, hopefully, stay out of it for good, then we’ll all be better off.
