27 May 2015
In response to today’s Queen’s Speech, Mike O’Connor, Chief Executive of StepChange Debt Charity, said:
“As the UK’s leading debt charity, we are disappointed at the lack of action to help deal with personal problem debt set out in the Queen’s Speech.
“Failing to deal with personal debt will undermine efforts to address other Government priorities. Problem debt adds to Britain’s productivity crisis with £2.3 billion in lost productivity and jobs. It also costs more than £1 billion in demand for our struggling health services - some 60% of our clients have sought medical advice for debt related illness.
“A record 600,000 people came to us for help with problem debt last year. There are 2.9 million people in Britain who are living with severe problem debt, and consumer credit lending has recently grown at its fastest rate since 2006.
“We welcomed the previous Government’s efforts to empower the Financial Conduct Authority to control the banks and deal with the worst practices in the payday lending market, and today we welcome proposals to increase the personal allowance.
“But dealing with poor practice and lowering taxes are not enough. Action is needed on the drivers of problem debt: a lack of financial resilience and a welfare safety net that leaves people relying on credit to keep up with the basics when they lose their job or see their income drop. Some 45% of our clients receiving Job Seekers Allowance don’t have enough to meet their basic costs; 31,000 people aged 21 and under came to us for help last year, a third of whom fell into debt when they lost their job or saw their income reduce. Four in five of our clients had no rainy day savings to shield them from debt.
“We are calling on the Government to introduce a low income savings scheme that aims to help every family build up £1,000 in rainy day savings. This would keep half a million families out of problem debt.
“Instead of making further cuts to the welfare safety net, which could force more people to rely on credit to keep up with their essential bills, the Government should aim to complement welfare with other protections. Before the Election, the Government committed to review the case for a new protection from interest and charges when people take action to deal with their debts. We want the Government to re-state its support for this review. The protection could give people an incentive to take action to deal with their financial problems and get help to get back onto a steady financial footing.”