Treasury to launch new debt advice initiative

The Treasury has confirmed that an initiative devised under the previous administration, ‘Breathing Space,’ will go ahead in 2021.

A 60-day breathing space period will see enforcement action from creditors halted and interest frozen for people with problem debt – and the Treasury announced that during this period, individuals will receive professional debt advice to find a long-term solution to their financial difficulties.

People receiving mental health crisis treatment will receive the same protections until their treatment is complete, with the Treasury acknowledging the impact that problem debt can have on wellbeing.

Publishing its impact assessment for Breathing Space, the Treasury predicted that it would help more than 700,000 people across the UK get professional help in its first year, increasing to 1.2 million in its tenth year of operation.

The Economic Secretary to the Treasury, John Glen, said: “Being trapped in debt can be an incredibly difficult experience, and with interest and potential enforcement action to contend with, it’s no surprise how stressful the impact can be.

“That’s why we will introduce Breathing Space in early 2021 as planned, so we can level up the whole country and help millions of people to rid themselves of problem debt.”

AJ Bell senior analyst, Tom Selby, suggested that persistent debt often places ‘severe strain’ on those affected and their families, describing it as ‘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,” Selby said.

Commenting on the launch of the new Government initiative, he added: “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.”

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