The Treasury is ramping up plans to accelerate financial inclusion this year, along with alternatives to high-cost credit, according to a Cabinet member’s address at Credit Strategy’s Parliamentary Briefing.
During the live broadcast, which featured speakers from across the political spectrum, government departments and the credit industry, economic secretary to the Treasury John Glen detailed several government measures aimed at supporting the financial inclusion agenda.
Glen’s speech took in the Treasury’s plan to pilot a zero-interest loan scheme, which he said “would help vulnerable customers meet unexpected costs with an alternative to high-cost credit.”
Expressing his preference several times to create alternatives to high-cost credit, Glen added that changes will be made to legislation to enable credit unions to offer a broader range of services and products. He also emphasised that the government will go further with the partnership with Fair4All Finance, the not-for-profit organisation, which has seen £96m from dormant accounts go to causes including financial inclusion.
Glen told viewers: “These issues are very important to the government and to me, personally”.
As some lenders struggle with forecasts for the number of customers who will be granted breathing space, the economic secretary mentioned the scheme - which will come into effect in May.
Glen said: “A standard breathing space will give those in problem debt the opportunity to seek professional debt. A mental health crisis breathing space will apply where an approved mental health professional certifies that a person is receiving mental health crisis treatment. The breathing space will apply for how long the treatment lasts plus 30 days.
“The main objective is to encourage people in problem debt to seek professional debt advice earlier and give them the time and the space they need to identify a sustainable debt solution.”
Steve Coppard, deputy director for the government debt management function at the Cabinet Office, spoke during a separate session at the Parliamentary Briefing.
Coppard’s address focussed on fair outcomes in debt management across government. He said: “When we think about outcomes being fair, it’s not in terms of an outcome being averagely OK, but a ‘just’ outcome, one that’s impartial and free from bias.”
Coppard stressed that there is a need to shift the mentality of collections being the only outcome, and that there are other valid options as well.
He also addressed the impact of the industry’s image on customer engagement levels, and how everyone involved in the industry has a role to play in changing that image.
The briefing also featured a Q&A with Lisa Fretwell, managing director of data services at Experian, on Credit Awareness Week, Credit Strategy’s campaign with the credit reference agency. As part of the week, a YouGov survey gauged the public’s understanding of credit information and their credit scores. Experian’s James Jones shares his opinion on the results here.
The Parliamentary Briefing came about as a study from Pinsent Masons revealed that the amount of outstanding debt owed to HMRC from UK businesses and taxpayers has reached £65.5bn during the pandemic. This figure has trebled from its 2019 total of £19.3bn.
According to Pinsent Masons, £26.6bn of that debt is sufficiently in arrears to enable it to be subject to immediate debt collection procedures.
However, HMRC is currently prevented from certain enforcement action to recover debt, due to the moratorium on insolvency action that has been in place since March 2020.
An on-demand recording of the Parliamentary Briefing will be available for premium members shortly.