This call from The Children’s Society just passed by on my screen and I decided to respond to it. Below is my submission.
1. Poverty – worry about debts, about how to acquire necessities such as food for one’s children, and what to pay for first – can cause a drop in IQ of up to 15 points. This indicates how much stress debts can cause for a child’s parents, creating a stressful environment for the child, not to mention various forms of deprivation (for which forced adoption is definitely not the appropriate solution, but I shouldn’t have to explain that).
There are many other publications.
Poverty is also linked to lower physical health, as you know from various studies conducted in Britain. Merely think of the combination of black moulds and cold homes. Tens of thousands of people die in Britain every winter as the result of being unable to afford to heat their homes properly. In insufficiently heated or insufficiently insulated homes, the probability of mould growth due to condensation against cold walls is higher as well. Then add lack of proper nutrition.
2. “Economic inequality harms societies”
Richard Wilkinson and other researchers, in various papers and presentations
3. “IMF research has shown that excessive inequality hinders growth and hollows out the country’s economic foundation. It erodes trust within society and fuels political tension.”
Christine Lagarde in a public speech at Harvard’s Kennedy School of Government, October 2017
4. Low wages are a major cause of poverty hence of debt in Britain. Parents have no control over this.
5. Problems with benefits are another major cause of severe poverty in Britain. Parents have no control over this either, but these issues can aggravate stress immensely, particularly debt-related stress.
6. All humans have human rights and human needs (such as the need for food and shelter), not just a few lucky people for whom fate decided that they were born and are growing up in lucky circumstances.
So I welcome the Government’s introduction of a breathing space scheme and statutory repayment plan, but it has to be the right scheme, not
be a tiny plaster on a gaping wound that may look pretty but accomplishes nothing. Its design must give it the best chance of achieving its aim of helping people repay their debts while not locking themselves into a corner from which they can never escape and [where they] can do no more than, essentially, wait for death, as dramatic as this may sound. I believe the following five principles will help do this:
1. ‘Breathing space’: Six weeks is helpful but it is not enough and there cannot be any gaps in this protection.
A six-week breathing space is a positive step that will give many families in problem debt the time and protection to seek advice and arrange a suitable solution.
However, evidence from a similar Scottish scheme shows that it takes on average 120 days to seek advice and apply for the right debt solution, so a longer breathing space would be more helpful. I believe that 6 months could be more effective and certainly more realistic. It depends on the time of year, however, and other factors.
If it is to be six weeks, there should at least be flexibility to ‘roll-over’ into a subsequent breathing space period if a repayment plan is being arranged but needs more time to be finalised. Otherwise, any gap in protection could risk the debtor falling back into problems under pressure from creditors.
Whatever the length of the breathing space, the Government should review how well it is working a year after its introduction AND amend the scheme accordingly if it turns out that it is not working optimally.
2. ‘Statutory repayment plan’: Flexibility is crucial to deal with temporary shocks
The statutory repayment plan option is a vital part of the proposals, as it offers the long-term sustainable solution allowing debts to be repaid in full over time. This component has to provide the necessary flexibility to put in place the most effective plan for each family’s circumstances.
Most problem debt is caused by a ‘negative life event’ such as job loss, illness or problems with benefits (delays of up to 6 months that can leave people without any income whatsoever, although common delays are 6 to 8 weeks). This can mean it is difficult to make any payments in the short term, but once things settle down most people will be able to restart payments.
A debt adviser therefore needs the flexibility to start the statutory repayment plan with a period of nominal ‘token payments’, allowing a short-term shock to pass before full repayments begin. The ability to use periods of token payments at any point during the repayment plan in response to unexpected temporary shocks should also be considered. A similar Scottish scheme allows payment suspensions for up to six months at any time within its debt payment programme phase.
3. All debts should be covered, with certain debts prioritised.
I support the principle that all debts should be covered, including debts to national government, local government and public bodies.
Some types of debt, such as rent arrears, need to be prioritised within a scheme. This would protect tenants from the risk of eviction.
4. Eligibility based on affordability assessment
The key eligibility test should be whether it is the most appropriate solution for each applicant, so there should be no general exclusions. An affordability assessment by a debt adviser, following well-established industry approaches, should determine whether a statutory repayment plan is the right option.
Regulations should ensure that the affordability assessment properly factors in the additional financial vulnerability of families with children.
This scheme should also be non-discriminatory, and for example not exclude someone because he or she threw a snowball at a police officer 10 years ago. Having a criminal record should make no difference with regard to this scheme. (To the contrary.) It does for the support rape victims receive, which is an abomination [particularly when it concerns “crimes” that are part of victims acting out after having been raped].
Naturally, this scheme should also be available to families with one or more family members who do not have British citizenship. (It is quite possible that they contributed a great deal in British taxes in the past and then for example got laid off. At the moment, Theresa May and her colleagues are making it very hard for anyone who isn’t British to sustain or acquire employment within Britain.)
5. Maximise support for families with children
Debt advisers should also be empowered to signpost families with children to appropriate support services to help deal with other underlying problems. This, however, should not be a blame game. British governments cause a lot of problems for many families in Britain, and these families have no control over this. It is not appropriate to blame families for the failures of the British government.
Thank you for listening.