Cameron's debt society

by Ed Bowsher on 02 February 2011  |  7 comments
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Plans to cut government funding for 500 debt advisers is a mistake.

Plans to cut government funding for 500 debt advisers are a mistake.

I’m disappointed to see that the government is going to cut funding for debt advice.  This is a short-sighted move that may not save as much money as the coalition hopes.

The previous government started to support face-to-face debt advice when it created the Financial Inclusion Fund in 2004. This fund provided the cash to train and support 500 specialist debt advisers, mostly based at Citizens Advice. Now the coalition will withdraw this support in March. These advisers have provided free, impartial advice which is just what debtors need.

In theory, this move will save £25 million a year, but I’m not sure that’s how things will turn out. If someone is in a real debt mess, there’s a real chance their home could be repossessed and they could end up in social housing or on housing benefit, costing the government money.

But if that person received good debt advice, he might be able to turn things around before he reached the nightmare scenario of repossession. So this week’s move may not only increase human misery, it may also save very little money.

In fairness to the government, it’s not giving up on the debt issue completely. It’s pinning its hopes on a new free financial advice service that is in the works. I think this service is a good idea and no doubt it will ensure fewer people get into a mess in the first place.

But if interest rates rise this year, more people are going to struggle with debt and they will need personalised, face-to-face advice to get out of the mess. They won’t have time to wait for a web-based financial advice service that will come later and may only offer general tips.

This cut doesn’t make sense to me and clashes completely with David Cameron’s ‘big society’ rhetoric. ‘Debt society’ seems more appropriate.