'Breathing space' period for people in debt crisis to be extended
People struggling with serious debt are set to be given a longer grace period of 60 days before being hit with further interest, charges and enforcement action, the Treasury has announced.
Chancellor Philip Hammond is expected to unveil the plans in Monday's Budget, which will extend the 'breathing space' period from six weeks.
MoneySavingExpert.com founder Martin Lewis has long campaigned for the Government to introduce breathing space for debt sufferers, to give them time to get advice and sort their finances.
There are also proposals for a 'No-interest Loan Scheme' in the UK – which would be an interest-free alternative to high-cost credit such as payday loans for those on low incomes. The Government is expected to conduct a study in 2019 to see how such a scheme, a similar version of which already exists in Australia, could work.
Martin: 'The news is a relief'
Martin Lewis, who is also chair of MoneySavingExpert, said of the breathing space extension: "The news that people are likely to get 60 days' breathing space, rather than the previously declared six weeks, is a relief. Most of us who were campaigning for this wanted it to be three months, but 60 days is far better than what had been the prior suggestion.
"Breathing space is a win, win, win. It's a win for the individual, who gets pressure removed and a chance to stop their finances spiralling out of control. It's a win for the creditor, because if you give people time to sort out their finances they are likely to be able to repay more in the long-run. And it's a win for the economy, because crisis debt creates many mental health issues, causing work absences and adding cost to the NHS."
What is 'breathing space'?
The idea behind the 'breathing space' scheme – also known as a debt respite scheme – is to give people in problem debt a fixed period without fees, charges, interest or enforcement action, to allow them time to get on top of debts before they spiral out of control.
The Government announced plans for a six-week period of breathing space in October 2017, although campaigners including Martin Lewis had previously argued this must be longer.
The Chancellor is expected to announce further details of the scheme in the Budget – we don't yet know when exactly it will start, or whether it will just apply in England or extend to Wales and Northern Ireland. Similar legislation, known as the Debt Arrangement Scheme, already exists in Scotland.
It was announced earlier this year that people in mental health crisis who are struggling with serious debt WON'T have to attend a debt advice meeting to be eligible for a 'breathing space' period.
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