• The Treasury has confirmed ‘Breathing Space’, an initiative devised under the previous administration, will go ahead in 2021 (https://www.gov.uk/government/news/breathing-space-to-help-millions-in-debt?utm_source=f80078f8-006b-4f73-b178-fb5992da8896&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate)
• Those with problem debt who seek debt advice will be entitled to a 60-day period during which enforcement action from creditors is halted and interest payments frozen
• 700,000 people expected to benefit from the intervention in the first 12 months
• As people are weaned off debt they should become more able to consider saving for their future
Tom Selby, senior analyst at AJ Bell, comments: “Persistent debt often places severe strain on those affected and their families. Debt is not just a financial problem: it can put pressure on relationships, cause families to fall apart and have a damaging impact on people’s mental health.
“It is important anyone struggling with their finances doesn’t stick their head in the sand, as this can lead to borrowing – and the associated interest payments - spiralling even further out of control.
“Seeking professional help can be a vital first step in dealing with debt, and the launch of Breathing Space will hopefully result in more people taking the initiative.
“Building financial resilience is clearly a key goal across Government and regulators at the moment, with a particular focus on vulnerable customers. This year we have already seen the FCA announce an overhaul of borrowing rules designed specifically to help vulnerable customers and wean people off overdrafts.
“If successful, this strategy should help millions of people not only escape problem debt but start to plan for their future. The first part of this process is setting a budget and clearing out those problem debts.
“Once the millstone of high cost loans or eye-wateringly expensive overdrafts has been removed, more people should be in a position to think about using the tax incentives on offer through things like ISAs and pensions to save for later life.”
