Debt Advice Services

James Murray Excerpts

Thursday 9th January 2025 Commons Chamber

[The Exchequer Secretary to the Treasury (James Murray)]

I congratulate my hon. Friend the Member for Walthamstow (Ms Creasy) on securing the debate. I very much recognise and have seen the work she has done over the years to raise the profile of responsible consumer credit practices and effective debt advice. I thank my hon. Friend the Member for Congleton (Mrs Russell) for her contribution and specifically for raising the experience of her constituents.

Credit, when offered responsibly, can be an essential tool for people who have to manage unexpected costs or who need to smooth their cash flow. As a Government, we want to support consumers in having access to credit when they need it. But, at the same time, we are determined to ensure that access to credit comes with robust protections to ensure that lending is affordable and consumers are protected when things go wrong. That is why in October last year we published a consultation on a proposed regulatory regime for “buy now, pay later” products. The regime will introduce better protections for millions of consumers and will bring “buy now, pay later” firms into the regulatory perimeter of the FCA. That in turn will mean that firms offering “buy now, pay later” products will be required to pay specific annual FCA fees and levies. Among those is the financial guidance levy, the proceeds of which fund free debt advice services.

As I turn to the importance of debt advice, I pay tribute to the thousands of debt advisers across the country for the critical work they do to provide support for those in need.

[Ms Creasy]

We all value the debt advisers. As my hon. Friend has just said, “buy now, pay later” companies do not yet contribute to the levy that pays for those people, but the companies themselves have said that they would make voluntary contributions. Would the Treasury consider approaching them to get that money ahead of their being part of the regulatory landscape, so that we can have more of these brilliant debt advisers?

[James Murray]

I am sure that Treasury officials and the Economic Secretary to the Treasury, my hon. Friend the Member for Hampstead and Highgate (Tulip Siddiq), will be in close contact with the sector about any proposals they have. It is important to emphasise that because of the regulations we are consulting on for the new regime, that will mean that “buy now, pay later” firms will be required to pay those specific fees and levies, which will help fund free debt advice services. We know that funding those services is important because intervention through debt advice services not only prevents financial difficulties from escalating, but protects people’s overall mental health and wellbeing. More widely, there are positive effects for families, communities and the economy at large.

As a new Government, we are committed to supporting national and community-based services through the Money and Pensions Service, or MAPS as it is commonly known. Those services provide advice to hundreds of thousands of individuals and families in need in England. In December, MAPS published its first debt advice impacts report, which showed that across 2023-24 people accessing debt advice through MAPS-funded services gained an estimated £48 million of extra income. That underlines the fact that for many people, advice not only allows them to deal with their debt problems, but helps them to find a way forward with more money in their pockets. Eighty-seven per cent of people who received MAPS-funded debt advice said they would recommend the service to someone in a similar situation.

Outside of England, the UK Government provide funding through the financial services levy to the devolved Governments in Scotland, Wales and Northern Ireland. As debt advice is a devolved matter, the devolved Governments have responsibility for delivering those services within their nations and for tailoring provision to the needs of their local communities.

My hon. Friends spoke about the gap between those who need debt advice and those who are currently accessing it. The Government recognise that gap and the need to tackle it. Funding levels, which my hon. Friends mentioned, are regularly reviewed to reflect demand, inflation and evolving needs. The MAPS debt advice budget for the upcoming financial year will be communicated in the usual way in the spring, and I will ensure that my hon. Friends are informed.

My hon. Friend the Member for Walthamstow mentioned the MAPS consultation last year on the future of its debt advice commissioning strategy. MAPS published its response to that consultation in October, setting out its commitment to increasing debt adviser wellbeing, further building advisers’ skills and delivering digital transformation across the debt advice sector. As part of its efforts to address unmet demand for debt advice, MAPS has also launched its debt advice modernisation fund, a grant initiative designed to support projects aimed at enhancing and modernising debt advice services in the not-for-profit sector. Projects are currently under way and will be completed by the end of March.

My hon. Friends touched on the wider issue of financial inclusion. I assure them that the Government are taking further steps to ensure that individuals can access the financial services they need.

[Warinder Juss (Wolverhampton West) (Lab)]

In my constituency, the Whitmore Reans Welfare Centre, a voluntary organisation, signposts individuals to the debt advice that they need. In the past, the centre received funding for a part-time or full-time caseworker, but it is finding it increasingly difficult to provide the kind of one-to-one advice mentioned earlier, which is so useful for residents. Can the Minister give any advice on how to help organisations of that nature so that constituents can be signposted to, and given, one-to-one advice?

[James Murray]

I thank my hon. Friend for raising that constituency case and highlighting the important work that that organisation does for his constituents. I cannot comment from the Dispatch Box on individual funding decisions, but he underlines the importance of tailoring to local need. Although there may be a national priority to ensure that people are provided with debt advice, individual local debt advice agencies will need to tailor their services to the needs of their communities. He is an excellent advocate for his constituents in that regard.

Alongside the debt advice services that the debate has focused on, it is important, as I was saying, that individuals can access the financial services that they need. That is why the Government announced in December our intention to develop a financial inclusion strategy that will aim to further tackle barriers to individual and household ability to access affordable and appropriate financial products and services. The strategy will be supported by a committee that the Economic Secretary to the Treasury convened for the first time in December, which will consider the problem of debt.

I will turn my attention briefly to the work that the Government are doing to support vulnerable individuals and businesses repaying debt to the public sector. The Government debt management function functional centre, based in the Treasury, convenes the debt fairness group—a collaboration with the debt advice sector that identifies opportunities to continuously improve public sector debt recovery processes. The functional centre’s work includes debt management toolkits to support public sector bodies dealing with those facing physical and mental health challenges, and to help them identify and support the 8.7 million adults in the UK who have experienced economic abuse.

I thank my hon. Friend the Member for Walthamstow once again for raising this important matter. I have no doubt that she will continue to be a champion on the issues that we have discussed. The Government remain committed to providing accessible debt advice and promoting financial inclusion. We are committed to ensuring that everyone has the support they need to manage their finances effectively and build a more secure future for themselves and their family.

Question put and agreed to.