At the last count, the UK is in the grip of an inflation outbreak, an energy bills crisis, a fiscal fiasco, gilt market ructions, pensions problems and a mortgage meltdown. There may be more. I simply cannot guarantee that something else won’t have fallen over by the time you read this column. It may be the prime minister.
The result of this panoply of woes, plus this week’s axing of the energy price guarantee from next April, will be to pile more financial pressure on to households already battling the cost of living crisis. What a time, then, to overhaul the country’s system for providing help and advice to those struggling with their debts.
Yet that is the plan. The Money and Pensions Service, an arms-length body under the Department of Work and Pensions, this month announced the outcome of its commissioning for debt advice in England. This was the latest in a long tale, rooted in an acknowledgment that demand for these services was outstripping supply but with the aspiration to provide more support online or by telephone.
In the process, MaPS was forced to backtrack in February 2022 on plans to cut the funding of face-to-face regional advice services by about half. It said in September that there would be a further 26-month extension of grants for these community services, which do complicated work advising those juggling multiple debts and who often struggle to access other support.
Then this month, it awarded three new national contracts to provide remote advice via phone or internet. In a veritable triumph of timing, those are due to start next February.
There are multiple issues here. The commissioning process itself has already “destabilised everything”, according to Damon Gibbons, head of the Centre for Responsible Credit, with the threat of funding cuts prompting fears of redundancies and the departure of experienced staff.
There is some scepticism in the sector about the claim that the new system’s funding at £76mn is 80 per cent higher than 2019. Poor reporting makes it hard to compare like with like. But what seems clear is that funding will fall from its pandemic level, when the system was given extra funds by the government. Yet advisers report rising demand since last winter and that is now “off the charts . . . It’s overwhelming at the moment,” according to Amy Taylor, chair of the Greater Manchester Money Advice Group.
Then there is the potential disruption from shifting to a new model, where national remote services refer to local providers and vice versa. This could boost front-line demand rather than reduce it, given that an estimated half of webchat contacts are ultimately referred to community-based services.
Caroline Siarkiewicz, chief executive of MaPS, said: “We needed to commission new services to meet the rise in demand . . . services will provide a more seamless and comprehensive offer for hundreds of thousands more people needing debt advice.”
Nerves weren’t soothed by the choice of providers. Some of the biggest, best-known debt charities, including StepChange, didn’t make the cut. Gregory Pennington, a commercial debt management company, was awarded two contracts, prompting concerns about how the MaPS work will be managed alongside their fee-based services. Some charities declined to comment, pointing to a standstill period with MaPS. Gregory Pennington did not respond to multiple messages.
Some in the banking sector are worried that a system that is largely funded by an industry levy could be swamped, in large part by energy bill debts, and that the new model simply hadn’t been designed with this situation in mind. “It does feel a bit like changing the tyre in the fast lane,” said one.
It is certainly hard to be confident that the planned increase in capacity — to support more than 650,000 people by year three — is sufficient. “I feel like this has been geared up to deal with a situation that’s not now relevant,” says Taylor. The combination of high inflation, stagnant wages, soaring energy bills and a sharp rise in mortgage rates, she says, could put many people beyond the point where straightforward debt advice and reorganisation can help.
Throw into the mix: a sector already under pressure and an untested operating model. Truly, it isn’t hard to see what could go wrong.
