Deficit (or negative) budgets have been a feature of debt advice for several years. However, providers have reported significant growth in clients with deficit budgets lately.
Despite the debt advice sector’s familiarity with these clients, achieving good outcomes for them is not easy and this creates challenges not just for the clients themselves, but for advisers and the sector’s overall capacity.
Why we published a call for evidence
In light of the above, we published a call for evidence on deficit budgets in August 2022, with the aim of:
- Developing a greater knowledge of deficit budget clients, including the different client cohorts that exist and their respective needs.
- Learning how debt advice might support deficit budget clients to achieve better, longer-lasting outcomes, and what providers would need to deliver this (including from us).
- Understanding how advice providers and creditors could work together to deliver better outcomes for clients, based on a shared understanding of clients and their needs.
The call for evidence received 24 written responses from organisations and individuals. Insight was also received via discussions with other organisations. We would like to thank all these stakeholders for taking time to support us with this work.
Key findings
Responses identified a range of challenges and potential opportunities in relation to deficit budgets:
- When clients often present in a state of hardship, advisers need to spend time helping with pressing needs before they can effectively engage clients with debt advice.
- It is often not possible to effectively resolve issues, or even move advice forward, without tackling wider issues.
- Some clients need more intensive support – with clients with additional vulnerabilities being particularly likely to have challenges engaging with the process.
- Advice recommendations often require clients to undertake complex actions themselves, and clients may not be capable of this without assistance. In particular, clients may need support with income maximisation.
- Creating a sustainable budget is challenging for deficit budget clients and significant time needs to be expended on this.
- Where a client’s issues are complex, cases can remain open for long periods. For example, where a client’s benefit situation is under review (for example, because a benefit decision is being appealed) it can take time for income to be confirmed and this may involve significant collaboration and communication with government departments.
- During this time, advisers may need to actively manage and attain support and forbearance from creditors, which can incur significant and ongoing resource.
- Finally, for this cohort of clients there can be barriers to debt solution access, in particular barriers to insolvency which make it difficult to move forward.
Respondents emphasized that there is no ‘magic bullet’ that will help all deficit budget clients – who often face challenges outside the power of debt advice to tackle. However, respondents also identified actions that could make a difference to many clients. The report explores these opportunities, as well as what the unmet needs of deficit budget clients may mean for advice models and how ‘success’ is defined and measured. It concludes with our plans for taking this work forward.
