I thank my hon. Friend for his intervention. I completely agree with his comments and commend him for the work that he did in this area.
After all, debt is more prominent among young people, with 71% of 25 to 34-year-olds having a credit card compared with only 20% of those aged 65 and over. It is time for this Bill, because the ease and availability of credit, over-lending, and the attendant consequences of problem debt are stark.
On Third Reading in the Lords, the Government amended the Bill to enable the introduction of a debt respite scheme in England, Wales and Northern Ireland. This was in the Conservative party manifesto, and it is crucial. It will offer breathing space to people who are trapped in debt—a ladder out of the hole they are stuck in—by stopping further interest, charges and enforcement action for a set period, and enabling a realistic repayment plan to be put in place. Budgeting advice is all well and good, but if the levels of interest and charges are compounding to an extent that people do not have the money to budget with, it is simply useless. That is why the debt respite scheme is so essential. It is crucial that it is offered and promoted effectively to help people in need.
This does, though, pose the question of how long the respite scheme would last for, which will be in the Secretary of State’s power. Charities in the sector are urging a six-month period. It is important that it is a
meaningful amount of time that will allow people enough time to address their debt problems and get achievable plans in place. It is in everyone’s interests that it is not a mere six-week period. In fact, StepChange, the debt charity, says that its clients usually take six to 12 months to stabilise their finances. The debt respite scheme will particularly help families. One in five parents say that they have had problems in the past year with problem debt, whereas in Scotland, where there is already a respite scheme, only 10.9% of families said the same thing.
I believe that our role as parliamentarians is to open doors and create opportunities. However, opportunities are useless if people are unable to access them. The debt respite scheme will offer people the helping hand that they need to seize those opportunities and the help that will be available from the Bill. In addition, we need the current system to work with the Bill, actively referring people and taking a more proactive approach to debt.
Universal credit streamlines benefits, which can assist with debt management and making work pay, but we are still offering and giving budgeting loans to those in considerable debt. More work needs to be done to identify and to help people with chronic and severe debt problems. I would like a debt review to be done when people make applications for budgeting loans. This is similar to what StepChange does when it reviews how to help a person. If the applicant has severe problems with debt, they can be referred and given the help, information and advice they need, as well as offered the debt respite scheme, with an achievable repayment plan.
It is irresponsible to add to such people’s debt in the way we currently do, so I urge the Minister to consider the matter in the context of debt support and management, especially given the disproportionate link between debt and unemployment. I have seen far too many constituents crippled by debt and then given a budgeting loan on top, which eats into the amount of universal credit that they have to manage with. Such people do not come forward and offer information about their debt for fear of stigma, fear of losing benefits and concerns about the legitimacy of having so many bank overdrafts and credit card debts. They therefore do not get the help they need and, instead, we give them a budgeting loan, which further compounds their problems. Budgeting loans are an excellent way to help many people with short-term finance issues and start-up costs, but they are not right for those already swimming in debt, who are often the most vulnerable. Those are the people the Bill is designed to help.
In conclusion, debt is arguably the biggest challenge to social mobility in this country and it is time we had a more proactive response in giving support. That is why I support the Bill. It is in the interests of all of us to address debt: this is not just a personal problem, but a national one. In fact, StepChange estimates that the cost to the state and society of problem debt, on top of the personal cost, is about £8 million. Although I applaud the Government for the Bill and their appreciation of the need to tackle debt, I also ask for a much more proactive approach to its implementation to ensure that the Bill is as effective as it can be.
5.52 pm