Independent Debt Advice

Angela Smith Excerpts

Tuesday 8th February 2011 Westminster Hall

[Chris White (Warwick and Leamington) (Con)]

I add my thanks to those given to the hon. Member for Makerfield (Yvonne Fovargue) for initiating a debate on an issue of massive concern for my constituents. As Members of Parliament, we often have to deal with constituents who, for one reason or another, have fallen into debt and are going through a difficult and distressing time. They need support and advice that is tailored to them directly because that can make the difference between getting back on track or falling off the rails completely.

I am sure that I speak for everyone in the Chamber when I say that one of the most important resources that we call on in our working lives is the local citizens advice bureau. I particularly call on the CAB in Warwick and Leamington, and I thank those who work for the CAB for their contribution to our local communities. Since becoming a Member of Parliament, I have been continually impressed by the work of my local citizens advice bureau, especially its professionalism and dedication. Through the CAB’s work, individuals are able to get the support that they need, and consequently overcome the difficult situations in which they find themselves.

Last year, Warwickshire citizens advice bureaux helped nearly 26,000 individual clients and resolved more than 92,000 problems. Nearly 300 local people gave up their time to help Warwickshire CAB and they generated unpaid work worth nearly £1 million. At my local CAB for Warwick district, 5,000 local people were helped with around 22,000 problems. Around 80% of CAB work is taken up with debt, benefit, housing and employment issues. We simply cannot afford to lose that service. Reductions in funding will damage citizens advice bureaux across the country, particularly in south Warwickshire. Such cuts threaten to create an advice desert for those who have problems with debt and social welfare law. Thousands of individuals could be without the help of organisations such as the CAB, and they will be prevented from receiving the vital help that they need.

It is not as if citizens advice bureaux do not provide value for money. In Warwick district CAB, over the past year, just one money adviser dealt with 217 new clients who owed a total of more than £3 million—an average of more than £20,000 per client. The CAB has saved tens of millions of pounds in the long term and it has brought considerable benefit to local communities across the country by helping people to move forward with their lives and access the support that they need. There is a clear case for maintaining spending on such things, and it makes no financial sense to push problems from one place to another. People’s problems will not go away merely because we stop funding help for them. Such problems will get worse, until the point when the state has to intervene in more expensive and intrusive ways. We are talking about a short-term saving at long-term expense.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

I am hugely enjoying the hon. Gentleman’s speech. Does he agree that it is imperative that we do not lose the highly skilled and trained staff who are employed by the financial inclusion fund, because that too would be a short-term financial gain at the expense of a long-term loss to the service?

[Chris White]

I am trying to impress upon the Minister that these services need to continue and that they are important to our communities. It is important to make that case today. Again, I thank the hon. Member for Makerfield for initiating a debate that gives us the opportunity to raise the profile of our CABs and the important work they do.

Organisations and institutions will still be required to channel their support. The CAB is an example of an organisation that is able to turn the desire of local people to help those in trouble into practical action. Warwick district CAB is assisted by more than 50 volunteers, who are able to make a huge difference to their local community. That capacity will diminish and the opportunity for individuals to help will be reduced if there are not enough full-time staff on hand to train, organise and manage volunteers. The loss of full-time staff will therefore have serious consequences that cannot simply be picked up by extra volunteers. If we reduce the funding given to such important organisations, it sends the wrong message at a time when we are looking to galvanise people into doing more for their local community and spend more of their time helping worthwhile causes. I appreciate why the Government are looking to reduce spending, but I do not believe that the calculus of cost has been accurately measured in this case.

--- Later in debate ---

[Nia Griffith]

I certainly share that very real concern, because not only is the advice not free, it is poor. The OFT found that front-line advisers working for debt management companies lack competence, and provide poor advice based on inadequate information. Not only is the client landed with having to pay a fee that is not made clear in the firm’s advertising, they are then poorly advised. Receiving poor advice on debt management is a serious business; it can cost the client considerable amounts of money.

Furthermore, the OFT also reports that there is low industry awareness of the Financial Ombudsman Service rules for resolving consumer complaints. Even with all the work that CABs and similar providers are doing at present, we currently have a situation where 129 companies that are not fit for purpose are trading on people’s debt problems.

What will happen to a CAB’s clients when the funding for debt advice is withdrawn? Some may not seek debt advice at all, perhaps because they do not know where else to go, or perhaps because they realise that debt advice companies will charge them fees and they worry, rightly, about being exploited and getting into yet more difficulty. Many will be driven to seek advice from debt management companies.

[Angela Smith]

Does my hon. Friend agree that the Government’s actions suggest that the concept of the big society is, indeed, a big sham, and that the real message coming from them is that if someone is struggling with debt, they are on their own?

[Nia Griffith]

Indeed I do.

People may not go to debt management companies because they realise that the advice given could be substandard, and that they will be charged fees and could end up in more difficulty, but many will be driven to seek advice from such companies, many of which have been shown to be doing a poor job. We could see a mushrooming of similar companies, out to profit from the loss of CAB advisers, and many more clients being charged fees for poor advice. No responsible Government should push forward policies that will allow that to happen.

What are the Government proposing as an alternative to the excellent work that CABs do? Can the Minister tell us how the proposed national money advice service will improve on the debt advice service that is currently funded by the financial inclusion fund and delivered through organisations such as Citizens Advice? Can he explain how clients who are currently being helped by CABs will be better served by the national money advice service?

Debt advice is a specialist area, and it is time-consuming and labour-intensive. No matter what expertise and computer programmes a debt adviser has, every client will have slightly different circumstances. It takes time to work through the problems, and for the client and adviser to discuss what the possible solutions might be and, when appropriate, for the adviser to arrange advocacy. Can the Minister explain what will happen to clients if the national money advice service is not up and running before CABs have to make their debt advisers redundant?

One of the problems for any new service is getting known and reaching the people who really need help. Citizens Advice is a well-established organisation—it is an established brand with a good reputation—and many people know that they can go to it to seek advice. People from all walks of life know where their local CAB is. Can the Minister explain how people will know about the national money advice service, and where they will go to access it? Can he explain the rationale for destroying an established service?

Given the economic outlook, with many more workers likely to lose their jobs due to Government cuts and the knock-on effects in the private sector, why does the Minister want to destroy a competent, independent, local, user-friendly service such as Citizens Advice and leave people bereft? At the moment, it is offering people very much needed and valuable debt advice.