Thank you for contacting me about plans to assist people in debt. Problem debt is a serious issue, and has certainly been exacerbated by the current crisis with COVID-19.
Problem debt is often difficult to escape and can have a devastating impact on existing issues including family problems and poor mental health. It is only right that people who fall into problem debt are helped to find a sustainable, long-lasting plan to solve their debt problems. That is why I welcome the action being taken to protect those who find themselves in problem debt through a new breathing space scheme.
This scheme will have two parts; a breathing space period and a statutory debt repayment plan. Together, these two aspects of the scheme will protect debtors from creditor action, help them get professional advice on their debt problems, and help them pay off their debts in a sustainable way. Colleagues in the Treasury have already started work on this scheme by investing an additional £12.5 million in throughout 2020-21 in order to implement breathing spaces as soon as possible.
The breathing space will provide debtors with a 60-day period in which interest and charges on their debts are frozen and enforcement action from creditors is paused. During the time, debtors will have to seek professional debt advice to find a sustainable solution, encouraging them to seek advice earlier and give them the headspace to identify the right debt solution for them. The statutory debt repayment plan is a new debt solution that will extend the breathing space protections to debtors who commit to fully repaying their debts in a manageable timeline.
On the wider issue of helping those who find themselves in problem debt, I am glad that the government-commissioned Money Advice Service is spending over £56 million to provide debt advice to over half a million people this financial year.
I realise that many people may be facing additional financial difficulties as a result of COVID-19, which is why council tax support schemes are in place to help local residents struggling to pay their full council tax bill, reducing the financial burden for almost millions of people across England. A further £500 million has been provided through the Hardship Fund to help vulnerable people during the coronavirus outbreak.
Decisive action was also taken to protect renters during the coronavirus outbreak by introducing a six-month moratorium on evictions in England and suspending housing possession proceedings. The ban on evictions provided security for millions of people at a time when many were struggling to make ends meet.
I also welcome that, back in March 2020, the Department for Business, Energy & Industrial Strategy secured an agreement with energy companies in order to support households impacted by the pandemic. The agreement saw that based on individual circumstances companies would reassess, reduce or pause debt repayments for those in financial distress. Companies also agreed to refer customers who were struggling to pay their bills to third party debt advisors.
