Helen Undy, Director, Money and Mental Health Policy Institute

Budget 2018: tough on problem debt, but not the causes of debt?

29 October 2018

The main mental health story from today’s Budget is the £2bn spending committed to NHS services. This is urgently needed for over-stretched crisis teams and children and young people’s services – although still falls short of the investment needed to reach true ‘parity’ with physical health.

Beyond this announcement, however, there are other bits of good news in the Red Book which could also make a real difference to people affected by mental health problems and debt.

Introducing zero-interest loans

The government’s zero-interest loans proposal announced today is based on the Good Shepherd scheme in Australia, which offers loans of up to around £800 with no interest or credit checks to people on lower income. It aims to help people meet emergency costs for things like washing machines, fridges or educational expenses. I represent Money and Mental Health on the Government’s Financial Inclusion Policy Forum, chaired by two government ministers, which has been key in advocating for a similar scheme to be made available in the UK.

Following the cap on the cost of payday loans, and the recent demise of Wonga, there have been concerns that reducing access to this form of high-cost credit would drive people further into arrears on essential bills, or going without essentials when unexpected costs arise. For people with mental health problems, who are less likely to be in paid work and more likely to be in temporary, part-time or low paid work, managing these unexpected expenses can be difficult. The zero-interest loans initiative – if ultimately implemented by the government – should help people avoid these risks. It is also welcome recognition that the market isn’t always best at generating the right solution for people in the most difficult circumstances.

Extending debt Breathing Space

The Breathing Space scheme gives people a window free from fees, charges and collections activity while they are getting help to resolve their debts. It’s intended to give people time to seek debt advice and find a solution before the additional charges and associated stress lead to a downward spiral that can feel impossible to climb out of. Today, the government extended that period of breathing space from six weeks to sixty days (about eight and a half weeks). This is a very welcome step, and will be particularly beneficial to people with mental health problems who may need more support to engage with debt advice and make a repayment plan.

Our Recovery Space campaign last spring also secured a government commitment to extend this scheme to everyone using NHS mental health crisis services, so that worry about debt and collections activity doesn’t hamper mental health recovery. The consultation on the Breathing Space scheme (also published today) states that this breathing space should last ‘throughout the full length of an individual’s care under an NHS crisis team’. We are delighted to see this commitment, which will make an enormous difference to people using mental health crisis services.

Funding for Universal Credit

Today’s budget announced another £1bn investment into the roll-out of Universal Credit over five years, a much-needed injection of cash. However, that money is worthless if it doesn’t reach the people who need it most due to flaws in the design of the system.

As highlighted by a committee of MPs last week, we believe that many people with mental health problems are likely to be left in financial difficulty by the Universal Credit roll-out, unaware that they need to make a new application or unable to do so (or to request assistance) within the time available. A few weeks ago we saw announcements that the wider roll-out would be delayed; we hope that this extra time and money will be used wisely to get the design right.

Here comes the ‘but’

Overall, this budget contained helpful measures to support people with mental health problems to avoid financial difficulty, or to reduce the psychological impact of problem debt. However, while these steps should be celebrated, more could have been done to address the causes of these problems – from low financial resilience and incomes to financial shocks caused by periods sickness absence.

These issues could be avoided with a benefits system that’s adequately funded and reaches those who need it; with sick pay that’s available for all and helps rather than hindering recovery; and a retail and financial environment that helps to limit the harm caused by problem gambling, shopping or use of expensive and inappropriate financial products.

These arguments can quickly become party political – and it’s easy to understand why ministers and officials may feel frustrated when a popular new policy is met with a chorus of accusations about why it’s their fault it’s needed in the first place. We celebrate these gaps being filled, but reflecting on how those gaps were created is not an exercise in point-scoring, it’s one in future-proofing. We welcome today’s steps to help people affected by mental health and debt problems, but will continue to campaign to tackle their causes in future.

Find out more about our Recovery Space campaign, which called for the Government’s proposed debt respite scheme to be extended to people in mental health crisis, here.