Government Breathing Space announcement – R3 response

19 June 2019

Duncan Swift, President of insolvency and restructuring trade body R3, responds to today's announcement that the Government is moving ahead with plans to introduce a 60-day Breathing Space period from 2021 for people with problem debts:

"We welcome the Government's announcement that it is moving ahead with the Breathing Space policy. We've long-supported the idea of a Breathing Space, and plans for its introduction will help those struggling with debts to get the advice they need to begin to resolve them.

"We also welcome the commitment that individuals using the Breathing Space must engage with professional debt advisers. Professional advice is a must for individuals struggling with debt. It gives them the chance to talk to an experienced, independent third party who can help them look at their debt issues objectively and find the fairest, most practical way of resolving them.

"The news that arrears owed to central and local government will be included in the Breathing Space is also positive and will mean the person who is in debt will be more fully protected from creditor pressure and from the risks of making a quick decision rather than a considered one."

More detail needed

Swift continued: "However, we need to see the Government's full consultation response, rather than just a press release, before we can see how this policy is going to work more fully.

"For example, today's announcement makes no mention of the 30 day check-in, which was mentioned during the consultation, and whether this suggestion will be maintained in the final proposals.

"The check in is an essential way of ensuring individuals in the breathing space take proactive action to tackle their financial difficulties, and helps to strike a balance between the needs of debtors and the rights of their creditors.

"Those aren't the only questions we have. How will the mental health support proposals work? What will the eligibility criteria be? This is a critical element of the proposals and one that needs careful consideration and clarification.

"Equally, how will the Statutory Debt Repayment Plan work? Does it sit within the UK's insolvency framework or independently of it? How does it differ from an Individual Voluntary Arrangement (IVA) or a Debt Relief Order (DRO) - and why would someone choose to set up a plan when one of these may be a better alternative?

"More information is needed about how these proposals translate into policy and we look forward to seeing the details of what the Government has planned - and to working with them to ensure that the finer points of this very worthwhile initiative work for everyone affected by problem debt."