News story

Breathing Space to help millions in debt

Government’s new breathing space period will freeze interest, fees and enforcement for people in problem debt, with further protections for those in mental health crisis treatment

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Millions of people with problem debt, including those facing mental health problems, will be helped by the government to get their finances under control, new figures released on Time to Talk Day (Thursday 6 February) show.

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

As well as this, those receiving mental health crisis treatment will receive the same protections until their treatment is complete, in acknowledgement of the clear impact problem debt can have on wellbeing.

The impact assessment for breathing space, published today, forecasts that it will help over 700,000 people across the UK get professional help in its first year, increasing up to 1.2 million a year by the tenth year of operation.

Of this, 25,000 to 50,000 people in mental health crisis treatment are expected to benefit from breathing space every year.

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.

Today’s figures underline just how critical it is that we roll out this policy, particularly on a day like today, where we should all work to reduce the stigma of mental health issues.

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.

CEO of StepChange Debt Charity, Phil Andrew, said:

We know that debt is bad for your mental health, with all the additional stress and anxiety that it can create. Around two in five people who turn to us have an additional vulnerability on top of their debt – and for half of them, that vulnerability is a mental health problem.

However, the good news is that after debt advice, many people report improvements in their wellbeing such as being able to sleep better at night or cope better with day-to-day life.

Breathing space will deliver much needed additional help in two important and connected ways. It will encourage more people to seek advice, and when they do, there will be better protections in place to stop further harm and help recovery.

Joanna Elson OBE, chief executive of the Money Advice Trust, said:

Breathing Space will provide a powerful new incentive for people in problem debt to seek the free advice they need, and give them the time and protections necessary to get back on the road to financial health.

We are particularly pleased that debts to local authorities and other government creditors will be included. Breathing Space will make a real difference to people in problem debt – and we look forward to playing our part in making this scheme a success.

Craig Simmons, Head of Debt Policy and Strategy at the Money and Pensions Service, said:

Having worked on the policy behind Breathing Space, it’s great to see it coming into effect in 2021. We welcome the fact that many people will benefit from 60 days without contact from their creditors. In this time, they can get debt advice and put a plan of action in place, all without further interest and charges being added to their debts.

Breathing space has a particular role in helping those struggling with mental health and money problems to receive appropriate support. This policy is one of many landscape shifting initiatives we expect to see as part of the UK Strategy for Financial Wellbeing, and we continue to trial, deliver and promote other interventions which can make a real difference to people’s lives.

As well as covering debts like credit cards and loans, breathing space will cover a wide range of government debts.

Creditors will also benefit from introducing breathing space, with over £400 million in extra repayments expected in the first year, as individuals get the support they need to get their payments back on track.

The announcement builds on previous government work to alleviate the impact of problem debt, including reforming regulation around consumer credit, widening access to professional debt advice and helping build individual financial resilience.

Published 6 February 2020