Spring Budget 2024 and its impact on collections and debt purchase sector

Commenting on Chancellor Jeremy Hunt’s Budget statement, CSA Chief Executive Chris Leslie said:

In what could probably (but not definitely!) be the last major fiscal event before the general election, the Chancellor was unsurprisingly focused on crowd-pleasing measures rather than studious reforms to the tax code.

The economic forecast remains subdued, with inflation receding more quickly than expected and as a consequence, expectations of falling interest rates are higher. The Office for Budget Responsibility tell a story of slowly recovering personal disposable incomes, but underlying this an economy with a growing population alongside persistent post-pandemic economic inactivity.

The headline cut in employee National Insurance contributions from 10% to 8% (and for the self-employed from 8% to 6%) should boost the take-home pay for working people typically by £450 a year with a start from 6 April. But beyond this, and looking specifically at measures with the potential to impact the debt collection and purchase sector in particular, there are seven announcements buried beneath the headlines that I would highlight:

1) Abolition of the £90 admin fee for Debt Relief Orders (DRO) from April
Those eligible for a DRO are often those in the most need and the removal of the fee will undoubtedly help improve access to debt relief. The announcement did not touch on how this gap in the Insolvency Service’s funding would be filled, so we will be looking more closely at the detail once it is available to ensure this will not fall at the feet of financial services firms. This measure aligns with the Scottish equivalent of DROs which do not carry a charge (Minimal Assets Process) and will cost the Treasury £5m pa.

The government is also raising the maximum debt value threshold from £30,000 to £50,000 and increasing the maximum value of motor vehicle that an individual can retain from £2,000 to £4,000, from 28 June 2024.

2) Universal Credit budgeting loan repayment periods extend from 12 to 24 months
Applying to Budgeting Advances taken from December 2024 onwards, this additional flexibility will be welcomed especially by the debt advice community.

3) Extension of local authority ‘Household Support Fund’ for further six months
This represents an additional £500m of support to the most vulnerable households.

4. Economic Crime Levy (ECL) for very large firms
The rate of ECL will be doubled from £250k to £500k pa for large firms regulated for AML purposes bringing in £20m pa. While we have clarified that the ECL should not apply to debt purchase companies, it is notable that the Treasury is taking steps to boost revenues here.

5) HMRC investment in debt management capacity
In a further announcement to the last Budget, the Treasury will invest £895m in 2025 then a further £1bn each year in addition thereafter in a measure billed as improving HMRC’s ability to manage tax debts to support individual and business taxpayers out of debt faster and collect tax that is due”.

6) £34m investment in deploying AI by the Public Sector Fraud authority

7) New regulation of the tax advice market – consultation on strengthening the regulatory framework and requiring tax advisers to register with HMRC.