Date: 2023-04-25
Yvonne Fovargue: This cost of living crisis is "unlike anything we've seen". Those are the words of Citizens Advice, which is truly on the frontline when it comes to the real bread-and-butter problems people face. We know that the rising cost of essentials impacts those on the lowest incomes the most. I used to talk about bumps in the road--unexpected life events that derail people, such as job loss or bereavement--but increasing numbers of people are simply running out of road. There is more debt and more unmanageable debt, and more demand for advice services. StepChange and Citizens Advice both say that the size and scale of the debt crisis is unlike anything they have seen before. The debt crisis means more borrowing, too. StepChange has found that people who use credit cards and overdrafts to pay for essentials, as more and more people do, are 10 times more likely to be in problem debt than those who do not. Some 1.4 million people are relying on high-cost credit to cover rent and other household bills. There is also a relatively new phenomenon: the negative budget. This is when, even after debt advice sessions and budget counselling, a client's income is not enough to meet their essential outgoings. Half of Citizens Advice clients and a third of StepChange clients are in that predicament. That is particularly worrying because it requires a rethink of how to support the most financially vulnerable. Yes, there are practical measures, but we need to better fund our advice agencies, which are seeing an enormous increase in demand. We have to be careful that this includes provision for face-to-face advice in addition to virtual advice, because people sometimes need to see a trusted adviser before going to another channel. We need to overhaul the type of debt solutions that advice agencies can offer. I welcome the breathing space that gives debtors respite from their creditors while they get their finances on track. I also welcome the expanded access to debt relief orders and the fresh start that bankruptcy can bring, but the up-front application fees are pricing people out of these options with nowhere to go. Applying for a debt relief order costs PS90 and declaring bankruptcy costs PS680, and those are up-front fees. They are simply not affordable for people who need such options, particularly those with negative budgets, and we need to consider how to fund them. We should also be wary of individual voluntary arrangements. Too many people are forced into IVAs without the impartial advice they need to ensure they are the best option for them. In fact, it is probably time  to undertake a full, holistic review of debt solutions. We need a simple, straightforward system that ensures people in debt are always able to access the system that best suits their needs, through independent, impartial advice that is suited to the individual. Such a review must look at enforcement, as the use of bailiffs is far too widespread. I was pleased to sponsor the launch of the Enforcement Conduct Board, but it needs to be put on a statutory footing. It is vital that creditors have to use a bailiff that is accredited by the ECB, and that includes central and local government, who are some of the worst offenders. There is no easy solution to the cost of living crisis, but for those who have reached the end of the road and can see no way out of their debt, we need to move from temporary fixes and piecemeal solutions to a long-term, sustainable plan.