Foreword
There have been several positive developments since I wrote the foreword to the last edition of this handbook in 2017, but many of the challenges and problems I highlighted then continue to affect the lives of people with unmanageable debt and those who advise them.
At that time, I referred to ’the recent phenomenon of deficit financial statements’. Unfortunately, advisers across the money advice sector are reporting an increase in the number of people seen with deficit budgets – with insufficient income to pay for essential household expenses, let alone make offers of payment to creditors.
Discussions at regional meetings of money advisers frequently turn to this topic, and particularly highlight the fact that many people with deficit budgets are actually in employment. Training courses, such as those developed by the Institute of Money Advisers and others, provide strategies to help advisers support their clients; however, there are many clients for whom advice cannot resolve the problems of a deficit budget and, at best, can only help them stretch insufficient income that little bit further.
Universal credit advance payments – which increased in 2018 to up to 100 per cent of the expected monthly award – may now contribute more towards living costs; however, feedback from frontline money advisers suggests that this change has done little to alleviate the hardship suffered by new claimants.
The amount of universal credit (UC) debt accrued can deter people from seeking the full advance needed to meet everyday living costs, leading many to rely on foodbanks and fall into arrears with essential expenses. This is compounded by not being permitted to have a second advance payment before the first monthly UC payment is made.
Recovery of the advance over 12 months often leads to monthly repayments substantially higher than most other creditors require. The intention to increase the repayment period to 16 months from 2021 is welcome. However, spreading a substantial debt over an extra four payments is unlikely to ease hardship in the way that adopting the single financial statement framework would do.
For the 36 per cent of UC claimants who are in work, pay cycles/delays leading to two earnings payments within one UC month, mean significantly reduced or nil UC so a claimant has to restart their claim. This causes problems for claimants attempting to budget and for money advisers attempting to help people make sustainable debt repayment arrangements.
Notwithstanding the increase in those with insufficient income to meet essential expenditure, the roll-out of the Standard Financial Statement (SFS) has been a welcome development since the last Handbook. Introduced by the Money Advice Service (now part of the Money and Pensions Service), it is now widely used across the sector and the SFS format has been used both in the current debt relief order application form and the pre-action protocol for debt claims.
However, there is still more to do: numerous bespoke and outdated income and expenditure forms are used by some creditors, including central and local government, making it difficult and time-consuming for clients and advisers to align financial details with the SFS. Public sector creditors also have more to do to ensure that affordable offers are accepted based on SFS criteria. To this end, the Institute of Money Advisers welcomes the work of the Cabinet Office Fairness Group and we continue to engage as a stakeholder of the group to inform its work to improve outcomes for clients with public sector debts.
I look forward to the introduction of the government’s new breathing space scheme, from 2021. This 60-day period, during which charges and enforcement action from creditors will be suspended, will help those who need time to seek advice and make arrangements to deal with their debts. With an increasing number of indebted clients suffering mental ill health, especially welcome is the provision for those receiving mental health crisis treatment, who will receive the same protections until their treatment is complete.
Increasing public awareness of the availability of money advice should encourage people to get help with their debts earlier. Of course, this is likely to lead to increased demand at a time when most debt advice services are already working at full capacity. While there may be scope to work more efficiently, sufficient funding and time is also required to ensure quality of advice is not compromised and effective outcomes for clients are achieved.
For everyone committed to providing professional, high quality-debt advice, the Debt Advice Handbook remains an essential resource and recommended reading for students of the Certificate in Money Advice Practice, the not-for-profit sector’s leading specialist qualification delivered by the Institute of Money Advisers in partnership with Staffordshire University.
Robert Wilson
Chief Executive, Institute of Money Advisers