Debt charity publishes action plan
In January 2015, debt charity StepChange released its ‘Action Plan on Problem Debt’. With a general election approaching, it calls on all political parties to carefully consider the findings.
Its ‘headline’ announcement to accompany the release of the plan is that for some 500,000 households, debt problems could be avoided if they had just £1,000 in savings set aside as an ‘emergency fund’. 27% of households do not currently have an emergency fund of one month’s income or more. StepChange is calling on the next Government to make provision for this in the auto-enrolment pension initiative, where a person’s contributions into their savings fund could be supplemented by contributions from their employer and from the Government. Alternatively, it suggests that the Government could contribute say, 20p for every £1 saved into an Individual Savings Account, in much the same way as tax relief is offered on personal pension contributions.
The report says that, despite the improving economic picture, 21 million people in the UK are struggling to pay their bills and 2.9 million people still have a serious debt problem. It also estimates that debt problems cost society as a whole some £8.3 billion. With all major political parties committed to some degree of austerity in the next Parliament, StepChange wants radical action to be taken to stop the problem becoming worse.
The charity’s other recommendations include:
- Improving access to low cost credit for those on lower incomes, such as making low cost loans available through high street banks, community centres etc
- Increasing the availability of free debt advice, such as by imposing a levy on credit providers to fund this advice
- A clampdown on aggressive debt collection practices
- Ensuring that entering into a formal debt solution does not damage an individual’s life chances
- Protecting children from the harmful consequences of debt, such as by encouraging children to save, educating them about debt in schools and imposing restrictions on credit advertising where children are likely to see it
Mike O’Connor, Chief Executive of StepChange, said:
“With personal debt showing worrying signs of growing and millions of people living on a financial knife edge and at risk of serious debt problems, we are calling on potential governments to make tackling personal debt a national priority. Encouraging more saving, especially by people on low incomes, is vital if they are to have a financial buffer to cope with financial shocks and avoid the slide into problem debt.
“In addition to encouraging more saving, in our action plan we are also asking potential governments to provide more support for people who want to tackle their debt problems, protect children and families from aggressive debt collection practices and ensure that people are helped to get back on their feet quickly following a financial crisis.”
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