Millions of Brits with problem debt, including those facing mental health problems, will be helped by the government to get their finances under control, HM Treasury has announced.
A 60-day “breathing space” period will see enforcement action from creditors halted and interest frozen for people with problem debt. During this period, people 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 well-being” the treasury said.
The impact assessment for breathing space, published on Thursday, 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 10th year.
Of this, 25,000 to 50,000 people in mental health crisis treatment are expected to benefit from breathing space every year.
John Glen, the economic secretary to the Treasury, 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.”
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 £400m in extra repayments expected in the first year, as people “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.
Phil Andrew, CEO of debt charity StepChange, 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 well-being 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.”