How has the breathing space scheme been used in its first year?

17 November 2022

In May 2021, the Government launched the Debt Respite Scheme, also known as the 'breathing space' scheme, to help people with debt worries by temporarily pausing creditor enforcement action to allow them the time to seek debtor advice, assess their situation and decide on the best possible solution to their circumstance.

In the first year of the scheme, there were more than 63,000 breathing space registrations. In this blog, we look at annual data from the Insolvency Service that breaks down how the scheme has been used by different people from different locations across England and Wales.

Cases expected to rise

Between 4^th May 2021 and 30^th April 2022, one in 736 adults in England and Wales entered a breathing space – a rate of 13.6 per 10,000. This is lower than the overall rate of personal insolvencies for 2021 during which one in every 429 adults entered an insolvency procedure.

Overall, personal insolvencies in England and Wales fell for the second consecutive year in 2021, likely to have been partly driven by enhanced government financial support measures put in place to support individuals during the pandemic. However, as the current cost of living pressures rise, we expect to see an increase in the number of people driven to enter an insolvency process in next year’s report.

As many of the trends in the new breathing space data are consistent with trends from the 2021 regional individual insolvency data, we are likely to see use of the breathing space scheme increase next year.

North of England hit hardest

Just as the North East has had the highest individual insolvency rate for the past six years, it was also the region with the highest breathing space registration rate, at 17.9 per 10,000 adults. This was followed by the North West and Yorkshire and the Humber which had breathing space rates higher than the England and Wales average – and these were also the regions with the highest individual insolvency rates in 2021.

The local authority with the highest breathing space rate was Halton in the North West, with 55.8 per 10,000 adults (one in 179) entering a breathing space scheme. This is nearly 70% higher than the 32.9 per 10,000 adults in Burnley, which was the second highest.

Of the ten local authorities with the highest breathing space rates, eight were in the north of England - four in the North West, two in the North East, and two in Yorkshire and the Humber. The final two were in the South West and South East. ONS data shows that all ten of these local authorities belonged to one of three groups; ‘Services, Manufacturing and Mining Legacy’, Manufacturing Traits’, or ‘Remoter Coastal Living’.

Impact on the South

London had the lowest breathing space registration rate at 9.8 per 10,000 – and has also been the regional with the lowest rate of personal insolvencies since 2016. London, along with the South West and the South East had lower breathing space rates than the England and Wales average.

Camden had the lowest breathing space rate at 5.9 per 10,000 adults (one in 1,682), and of the ten local authorities with the lowest breathing space rates, five were in London and eight of the ten were in either the ‘London Cosmopolitan’ or ‘Affluent England’ supergroups in the ONS Local Authority Classification.

Consistent age distribution trends

Three-quarters of individuals entering breathing spaces were aged between 25 and 54, despite this group making up only half of the adult population. The rate for these groups was more than twice as high as for 18-24 year olds and approximately nine times higher than the 2.6 per 10,000 for those aged 65 and over.

This trend is consistent with personal insolvency statistics. In 2021, insolvency rates were highest for those aged between 25 and 44 and lowest for those aged over 65. However, differences between age groups were larger for insolvency than for breathing spaces, with insolvency rates for adults aged 25 to 44 being three times higher than for those aged 18-24 and 12 times more than for those aged 65 and over.