Debt advice services lack the capacity to cope with the cost-of-living crisis

In April, the Money and Pensions Service (‘MaPS’) announced that it was reducing the targets for community-based debt advice services by 29%. Over the course of the year, the four grant funded providers of these services will now be expected to deliver advice to just under 100,000 people.

This reduction in target has been justified by MaPS as a response to the increased complexity of cases that debt advisers have been seeing through the cost-of-living crisis, and it has been made following concerns that high volume targets were placing advisers under considerable pressure. As MaPS put it in their press release:

“The new total reflects the fact that clients need more time and support from advisers. It also makes it feasible to provide both the best standard of service for clients and the right level of protection for debt advisers’ welfare by ensuring their workloads are more manageable.”

Whilst the acknowledgement that the cost-of-living crisis has led to more complex cases is welcome, we are concerned that MaPS fails to acknowledge that there has also been an increase in demand for services. The fundamental problem of a lack of capacity in front-line services to deal with that demand is not being addressed.

How much capacity is there overall?

MaPS has announced that its “expectation is that at least 560,000 people will receive debt advice via our community-based services grants and contracts” this year.

This is the same number of people that were expected to be advised by MaPS funded agencies in 2019/20 – some four years ago, and prior to the pandemic and cost-living crisis which have shattered the finances of many households since.

By MaPS’ own estimates the need for debt advice has increased by 2 million in the past two years alone, and in May this year the Financial Conduct Authority reported that:

The number of adults who missed payments on any domestic bills or meeting any of their credit commitments in 3 or more of the previous 6 months went up by 1.4 million: from 4.2 million (8%) in May 2022 to 5.6 million (11%) in January 2023.

There simply isn’t the required level of capacity in debt advice services to meet the demands that they are facing, with many community-based agencies reporting lengthy waiting lists for an appointment.

Why isn’t there sufficient capacity?

MaPS has failed to deliver any significant increase in capacity over the past four years, despite having received considerably more funding from government to do so, particularly during the pandemic.

Whilst the fall in the number of people receiving advice during the pandemic can be explained by a combination of the closure of face-to-face agencies during the lockdowns and government’s temporary assistance for households, including suspensions of debt enforcement, the lack of any significant increase in capacity since is scandalous.

In the MaPS Annual Report of October 2022, their Chief Executive, Caroline Siarkiewicz, noted that they expected demand for services to rise and that:

“In order to meet this increase, for 2022/23 we have secured significantly more funding for debt advice provision in England…and have launched a procurement exercise to ensure that we are able to meet the challenge of serving more people than ever before.”

But that procurement exercise proposed cuts of 50% to community-based services, resulting in an outcry from advisers, and politicians, which ultimately forced a backdown and the promise that grant funding would remain at its current level until a consultation concerning the future of community-based services had been conducted.

That promise now rings hollow, with MaPS having included a 10% cut to grant funded agencies within its agreements for 2023/204.

But the procurement exercise of 2022 was a disaster in other ways too. The threat of redundancies caused many advisers to leave, and vacant posts were not filled in the light of ongoing funding uncertainties.

This also meant that many new debt advice trainees, recruited through an Increasing Capacity Project supported by the additional funding for MaPS during the pandemic, found that there were no qualified jobs to move into.

As we understand it, Citizens Advice – the largest of the four grant funded agencies – has narrowly managed to avoid making compulsory redundancies in response to the recent cuts, by deleting vacant posts. But it has left capacity to deliver shattered.

As for the procurement of the national contracts – which were intended to boost capacity through the delivery of digital and telephone advice – we find that these are expected to deliver 460,000 “sessions” in 2023/24 at a cost of £46 million. That equates to just £100 of funding per client. It is not clear how these services will cope with the increased complexity of cases without referring to community-based organisations and how double-counting of cases will be avoided within MaPs’ monitoring framework.

Even within community-based settings, expected to deal with the most complex of cases, funding levels are at just £300 per client.

These levels of funding are woeful given the demands that the sector faces and the pressures that advisers are under.

A long-term strategy for debt advice – backed by a considerable increase in funding is urgently required.

WADA therefore calls for:

An immediate reversal of the 10% funding cut made to community-based debt advice services earlier this year; and

A Parliamentary inquiry to assess the demand for debt advice and the level of funding needed to meet this, and to inform the setting of the levy paid by financial services firms for debt advice services.