Site icon The Money and Pensions Service

Update on debt advice funding in the wake of Covid-19

I’m sure like many people, here at MaPS we’ve felt the shock, uncertainty and concern caused by the COVID 19 pandemic. The past few months will have impacted all of us in some way, and MaPS has been particularly focused on the impact on people’s financial wellbeing – both in the here and now but also looking ahead to more longer-term effects.

We shared back in June that we expect the need for debt advice to climb steadily over the next 18 months, with around 3 million more people than before the pandemic needing support by the end of 2021. Addressing that need now becomes our top priority and in this blog I set out how we are investing the £37.8m of additional funds we secured from the government in June. Over the next 18 months, we intend to help 1 million more people engage with debt advice and provide a further 2 million with access to money guidance.

While responding to the crisis is absolutely critical, we haven’t forgotten or stopped the key things we were working on with the sector before COVID 19 came along and I will write about this in a follow-up blog later in September.

We know just how valuable debt advice is to individuals and it will continue to bring a significantly positive impact to broader society, particularly in these challenging times.

Maintaining pre-pandemic capacity

Before fully turning our attention to increasing capacity, we’re working hard to maintain as much of the pre-pandemic capacity as possible.

Some funding streams were particularly hit by the changing environment and many advisers have had to transition to remote working from their usual place of work. In the agencies we fund, we’ve provided some advisers with the technology to ensure they can still work really effectively from home; in other funded agencies we’re just about to offer access to the Money Adviser Network (as part of PACE), providing the ability to securely receive customer referrals in any location and in a remote working setting.

The funding source known as ‘Fair Share’ has been particularly hit since March. When a customer makes a debt repayment in a Debt Management Plan (DMP), a proportion is returned by creditors to the debt advice agency as a donation. With many customers’ having stopped or reduced debt repayments during the pandemic, the level of funding through Fair Share has in turn reduced, severely challenging agencies’ ability to continue debt advice at the same volume.

We’ve now entered into grant agreements with the three significant agencies in receipt of Fair Share funding – StepChange, Payplan and Christians Against Poverty – to fund lost DMP income throughout the rest of financial year, thereby ensuring they can maintain much of their pre-pandemic capacity for customers in need.

Fair Share is so far the clearest and most evidenced funding source to be impacted, but we are aware that other sources may already be facing challenge too in light of COVID 19. That’s why we carried out a survey with the rest of the sector to better understand what’s happening, and we’re incredibly grateful to the agencies who responded. We’re currently working through the findings and stand ready to respond to the emerging circumstances in the spirit the government provided us with extra funding.

The value of our maintaining capacity budget in 2020/21 is c£14m and will enable at least 150,000-160,000 thousand people to receive debt advice who otherwise would not have been able to.

Increasing capacity

We know once payment holidays and other support schemes end we will be in a landscape we’ve never really seen before, and demand for debt advice will start to rise.

Many customers are engaging with digital services more, some for the first time. Others will prefer to access face-to-face services but may continue to find access limited as social distancing restrictions remain in place. We’re also aware a huge number of people will be experiencing financial difficulties for the first time too and some solely as a result of the pandemic.

For all customers, we want to ensure debt advice is available free of charge and in a way that fits their needs. Focus groups have told us the pandemic has greatly increased people’s willingness to reach out for support when they need it, so we also have an opportunity to reach people earlier when they have more options for tackling problem debt.

To meet the increased demand, we intend to fund a range of providers who will offer a variety of channels through which people can engage. Greater investment in digital capacity will be a particular focus, both for regulated debt advice provision and more generic money guidance. We have recently run an early market engagement exercise and we’ll be following this with a commissioning exercise to get the provision in place – our intent is that at least 600,000 people will receive digital or omnichannel debt advice  as a result of the funds we invest over this and the next financial year.

As you may have seen, we are now mobilising plans to enable recruitment, training and ongoing costs of an additional 500 new debt advisers across various channels in England. Some of these advisers will be recruited within the advice agencies we already fund while others will be in the broader advice sector via an ongoing bidding round, which has just gone live.

The value of our increasing capacity budget in 2020/21 is c£24m and we intend to continue further investment into 2021/22. 

In the meantime…

While we’re looking ahead to the anticipated demand towards the end of the year, we’re already taking action now to help people.

The recently launched Money Navigator Tool is a diagnostic tool which asks people a short series of questions about their financial situation, before providing guidance which is personalised according to their needs.

Customers looking for debt advice or organisations looking to refer people into debt advice can use our impartial Debt Advice Locator Tool.

If you want to be kept informed of the latest developments, you can also sign up to Money and Pensions Service communications here.

Craig Simmons is Head of Debt Policy and Strategy at the Money and Pensions Service.

Exit mobile version