When economic secretary to the Treasury John Glen stopped off at a Glasgow credit union as part of a summer fact-finding tour of the UK, his mission was to gather information that could help inform government thinking on financial inclusion.

In particular, he said he was hoping to come up ways to “encourage people to engage with and use credit unions”, which offer members the chance to access affordable credit products in return for saving small sums on a regular basis.

It is perhaps no surprise then, that credit unions featured in yesterday’s Budget, with the Government saying it will launch a pilot of a “prize-linked saving scheme for credit unions” that will “help people increase their financial resilience while boosting awareness and membership of these community organisations”.

Though no further details of the scheme were released, the Government said it was one of a package of measures designed to support the supply of affordable credit.

It said it was introducing the measures because it believes that “a strong and vibrant social lending sector is crucial so that everyone has access to valuable financial services, regardless of their circumstances”.

In addition to the saving scheme, the Government said it would provide £2 million of funding to “promote innovative technological solutions” to support social and community lenders, with the cash being made available to businesses already operating in the fintech space.

It also plans to simplify regulations so that regulated social landlords can direct their tenants towards alternatives to high-cost credit while it will take steps to ensure £55m of funds lying in dormant bank accounts can be used as a source of affordable credit.

In its most eye-catching announcements, the Government said it plans to launch a feasibility study with the ultimate aim of designing a pilot for a no-interest loans scheme, and will also begin a consultation on the viability of extending the six-week “breathing space” that currently protects those in debt against creditor action to 60 days.

The measures were broadly welcomed by Richard Lane of StepChange Debt Charity, who said that if implemented properly they could “make a real difference to households in Britain facing problem debt”.

“The announcements of schemes like breathing space and a no-interest loan scheme show that with creativity and ambition we can make progress in addressing problem debt,” he said.

“With the launch of a consultation on a debt breathing space scheme – something that we have campaigned for since 2014 - the vital scheme is now heading towards becoming a reality.

“This will help to address problem debt, and while the detail needs careful consideration, it is particularly welcome that government debts will be included in the scheme.

“We’re also delighted to see progress towards the development of a no-interest loan scheme through a feasibility study and a pilot scheme, in line with our long-running campaign for better alternatives to high-cost short-term credit.”

However, Greg Stevens of the Consumer Credit Trade Association said the organisation is “sceptical about the practicalities of a number of the Government’s proposals”, and in particular the zero-interest loan scheme and the extension to the period of breathing space.

He said the former initiative is likely to “run headlong into all the same challenges that commercial lenders face every day - customers who want only small loans over short periods, which vastly increases the unit cost compared to larger, longer-term loans; high levels of bad debt; and very high loan-servicing costs”.

The latter plan, meanwhile, would run the risk of morphing into a “statutory debt write-off scheme”. “Ministers will be come under constant pressure to extend and extend until, eventually, lenders stop lending because the chance of ever getting repaid will become more and more remote,” he said.

Alan Campbell of consumer campaign group Debt Hacker also criticised the Government’s proposals, saying that the feasibility study for the interest-free loan scheme in particular “could be too little too late”.

“This Government needs to deal with the root of the problem - the credit industry has been getting away with breaking the rules and selling unaffordable loans to vulnerable people for years,” he said.

“The best way to stamp out these practices once and for all is for Government to firmly enforce the existing affordability rules. While the regulator has been asleep at the wheel, some borrowers have taken matters into their own hands, and their complaints about unaffordable loans helped bring down [payday lender] Wonga.

“Now it’s time for more borrowers to be empowered to exercise their rights, and the rest of the payday lenders held to account.”

He added that the other measures mooted by the Government would not resolve “the nation’s personal debt crisis” and that instead the Chancellor should have come up with proposals that would see the credit industry “reformed for good”.

Mr Stevens added: “The Government needs to ensure that it balances consumer protection with access to credit, and that it understands the technicalities of its proposals — and doesn’t succumb to wishful thinking about how easy it is to implement some of these schemes.”