Following our recent webinar on ‘Breathing Space – the impact on Local Authorities’ delivered by Policy in Practice, we have incorporated some of the key points from this session in our blog article below.
The Breathing Space (debt respite) scheme is due to come into force on May 4th 2021 with the aim of encouraging people in financial difficulty to get access to independent, professional advice as well as have a moratorium put on their debt for a limited time period. This will have a significant impact on Local Authorities, particularly as Council Tax arrears are reported to be the most common debt problem presented to Citizens Advice.
Council Tax debt
A recent paper states that over 2 million people say they have fallen behind on their council tax bills due to Coronavirus, with 2.2 million behind on their bills going into the crisis. Council Tax arrears have increased from £3.2bn in 2018-19 to £3.6bn in 2019-20 and there is no sign of that figure reducing in the near future. Rent arrears are also on the increase and unemployment is expected to keep rising putting further pressure on households to make ends meet.
Following various consultations culminating in the launch of Breathing Space, the Treasury believe that tackling problem debt leads to higher and more reliable recovery whilst lessening the physical and mental impact of the problem debt. An impact assessment carried out believes that tackling this debt will lead to over £400m in increased collections and higher recoveries as a result.
How will breathing space work
An individual can only be granted Breathing Space if they consult an independent FCA or Local Authority debt adviser. These advisers will be required to carry out eligibility checks to see if the individual is eligible for Breathing Space. If the debtor qualifies, they can be entered into the scheme for 60 days, or longer if mental health issues are diagnosed by an approved Mental Health Practitioner.
Debtor Protections under Breathing Space
Once a debtor has entered Breathing Space a number of protections can be applied to them, such as no enforcement action can be taken during that time alongside an effective freeze on interest, fees, penalties and charges. It gives debtors time to think and plan for the best way out of the situation they find themselves in with the help of some professional advice.
Local Authority Obligations
Local Authorities need to ensure that any action being taken by appointed agents is stopped and be able to identify the total level of debt that debtor owes and which a moratorium has been applied to. This is in addition to notifying the debt adviser of any additional debts that are identified
As well as understanding which debts are to be included and excluded, so for example advance payments of Universal Credit are not included, whilst rent arrears are included but new liabilities will continue to accrue, Authorities will need to have some kind of mechanism in place to manage Breathing Space cases.
Ideally a Council should be able to consolidate and view an individual’s entire debt across all departments within the Authority including Council Tax, Housing Benefits Overpayments, Rent Arrears, Parking Services and Sundry Debt. There is a distinct need to move away from a silo mentality, sharing more data internally and working with welfare teams to understand the true extent of the debt. This in turn will lead to improved communication and less pressure placed on debtors, with just one adviser being able to deal with a debtor’s total debt rather than debtors being contacted by multiple teams within an Authority. It will also make the management of Breathing Space cases easier to administer by having all the data upfront and readily available to report and share with the appropriate teams and organisations.
Breathing Space Case Management
At Destin Solutions we developed a reporting solution that provides a ‘single view of council debt’ and has been used by a number of Authorities for several years. It is a tried and tested platform to which we have now added case management capabilities. The Fusion case management system will enable Authorities or those operating on their behalf to log any incoming cases that have been granted Breathing Space. The system also enables Authorities to pass any relevant case details on to the associated debt department and to keep a track of where those cases are in the process.
With full reporting capabilities and the option to integrate consumer insights to provide a more rounded view of the finances of debtors, such as credit statements and the level of debt held by individuals, Fusion can be used to either manage cases entering Breathing Space or proactively try to identify and intervene on cases before they reach that stage.
If you want to find out more about our Fusion solution please contact either duncan.baxter@destin.co.uk or philip.ryan@destin.co.uk for more details.
If you want to view the recording of our recent webinar delivered by Policy in Practice on Breathing Space and its impact on Local Authorities, complete our form here >
