Published On: Tue, Sep 29th, 2020

Bank of England debt data ‘does not reflect’ reality – tax and mortgage changes called for | Personal Finance | Finance


Debt problems have been exacerbated in recent months as coronavirus impacted incomes and employment across the UK. Today, the Bank of England (BoE) released its latest Money and Credit figures which showed consumers may finally be recovering to a certain extent.

With repayments increasing, it could be taken as a sign of growing confidence and stability among consumers but the Money Advice Trust warns this may be an oversimplification.

As Joanna Elson, the chief executive of the Money Advice Trust, explained: “Today’s Bank of England figures show an increase in repayments on borrowing, but this does not reflect the lived reality for millions of households who are struggling to make ends meet.

“At National Debtline we are hearing from people who have fallen behind on essential household bills as a result of the Covid-19 outbreak.

“Many are trying to deal with their immediate challenges of paying, rent, mortgages, council tax and other bills and are worried about their financial futures.”

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On this, Joanna went on to comment on the specific areas she’d like to see changed: “The government has already taken decisive steps to support jobs and wages – we now need further action to prevent households falling into debt on a range of household bills.

“This needs to include, no-interest loans to help people meet their rent payments, changes to the Support for Mortgage Interest scheme and urgent reform of the way council tax is collected.”

The Support for Mortgage Interest scheme involves homeowners receiving help from the government to pay their mortgage or cover loans taken out for certain repairs and improvements made to the home.

It will come through as a loan which will need to be repaid with interest when the person involved sells or transfers ownership of their home.

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Council tax reform has been called for from many charities and institutions as the government’s debt collection practices have faced harsh criticism in recent months.

Peter Tutton, the Head of Policy, Research and Public Affairs at StepChange, recently examined the government’s debt collection practices noting: “Now is the time for the Government to get its house in order on its own debt management practices.

“The current unhealthy relationship between government debt and poor collection practices exists across all areas, which is worrying given the high level of vulnerability among those who owe money.

“One example is starkly demonstrated by the over-use of bailiffs to enforce council tax arrears.

“Even the language of government debt collection is frequently toxic and counterproductive – frightening people away from engagement, rather than fostering it.”

“So much can be learned from the experience of the commercial credit sector, where a regulatory structure has been built that focuses on treating customers fairly and requiring forbearance under a clear, compulsory, and well-monitored framework in which information is shared to inform realistic repayment plans. It’s time to replicate this in the world of government debts too.”

In March, the use of bailiffs was suspended as coronavirus raged on but their usage was resumed in August.

Where a debt is severe enough, bailiffs have the right to take luxury items such as TVs or games consoles to repay what is owed.



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