Credit, Collections & Insolvency News
The Government has announced an extra £37.8 million support package will be available to debt advice providers this year.
The Money and Pensions Service (MaPS), will oversee the allocation of the funds, including to charities, for debt advice and other money guidance services.
The support package, which will bring the MaPS budget for debt advice to over £100 million this financial year, will help providers to deliver advice to more people in England who may be experiencing financial problems due to coronavirus. It will also help providers who have seen a fall in their income streams, enabling them to continue their vital work and supporting their staff to deliver these services.
The funding will be managed by MaPS which has committed to the following:
The extra money is in addition to the existing MaPS budget for debt advice in 2020/21 of £64.6 million and will come from a combination of government funds, reallocated MaPS budget and an industry levy. MaPS is also working with the FCA to establish a fairer and more sustainable debt advice funding approach for the future.
In addition to the £37.8 million being announced by HM Treasury today, £5.9 million is also being allocated to Northern Ireland, Scotland and Wales because debt advice is a devolved matter.
The funding consists of £20.6 million from the government and £14.2 million raised through a one-off increase to the Financial Services Levy. In addition, MaPS will also be contributing a further £3 million from their existing budget.
The Financial Services Levy provides funding for debt advice through MaPS and this one-off increase to the levy will see finance firms providing an extra £14.2 million in 2020-21. The Financial Conduct Authority (FCA) will consult on the details of this one-off rise in due course.
The Economic Secretary to the Treasury, John Glen said “We know that some people are struggling with their finances during this difficult time, which is why we want to make sure people can access the help and support they need to manage their debts and get their finances back on track. The joint funding package will help debt advice providers to continue with – and increase – their vital work.”
“This extra funding comes on top of the unprecedented package we have put in place to support individuals, businesses and the economy through the coronavirus outbreak.”
Minister for Pensions and Financial Inclusion, Guy Opperman, said “The Money and Pension Service was set up to provide free and impartial guidance for those seeking to take control of their finances. During these challenging times, that work is even more important, so it’s vital that we provide additional support for those concerned about their financial wellbeing. This funding package will help ensure that people can obtain the quality guidance and help that they need to help manage their money.”
Chief Executive at the Money and Pensions Service, Caroline Sienkiewicz, said “This pandemic is first and foremost a health emergency, but for many, the longest-lasting impact will be a financial one. Experience and evidence tell us that the number of people needing formal debt advice in the wake of a major event like this increases slowly at first but is then likely to grow for many months. When the greatest demand for debt advice hits, potentially in 18 months’ time, we need to be ready and that means acting now.”
“Debt services are already over-subscribed so we’ll be working hard to help people early before their financial situation gets too bad. We already have projects underway to help deliver debt advice differently, making better use of data and helping people find the advice that is available more efficiently. For people facing money struggles it’s important they know we are by their side to help them through – not just now, but for the many months to come.”
Welcoming the Government announcement of an additional £38 million StepChange CEO Phil Andrew said “The additional £38 million funding announced today to help the debt advice sector increase capacity quickly is very welcome, but also a worrying signpost to the bumpy road ahead for household finances. “
“At StepChange we are working in partnership with the Money and Pension service on real, practical solutions for the millions of households who will be impacted by the pandemic. We know that they will need support to get back on their feet. :
“Policy measures to help mitigate the effects of the crisis are needed alongside the ability to deliver advice to people in difficulty. We are working hard to ensure that both our services, and their delivery, are as efficient and effective as possible at helping people whose finances have been damaged by the pandemic – as well as those who were already facing difficulty before the pandemic started. It’s worth remembering that nearly 10 million households faced financial stress even before the pandemic, and our new research suggests that 4.6 million people are already facing financial problems as a direct result of it.”
Joanna Elson, Chief Executive of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said “Tackling problem debt will be key to the UK’s recovery from Covid-19 – and we are pleased the government has recognised the central role that debt advice will play in helping households out of this crisis. ”
“This welcome funding will make a significant dent in the problem of getting free debt advice to everyone who needs it. The impact of Covid-19 on household and small business owners’ finances will of course be felt for many years – and additional funding will need to be sustained well beyond the current year.”
“It is also important that the government, regulators and creditors work together to flatten the curve in debt problems in the months ahead. The withdrawal of temporary relief measures introduced to help households through the outbreak must be slow, cautious and co-ordinated – with people in financial difficulty given the time they need to receive free debt advice and act on it.”
Dame Gillian Guy Chief Executive Officer at Citizens Advice said “As coronavirus continues to take its toll on household incomes, it’s likely many people will be falling into debt. It’s vital they’re able to access free, impartial and confidential advice to help them manage their finances in this tough situation. That’s why today’s announcement of much-needed funding for debt advice is good news.”
“We’ll continue to work with the government, the Money and Pensions Service, and our partners in the sector to ensure people struggling with debt get the help and support that they need.”