Additional £38 million for debt advice funding in England goes into action

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The first tranche of an additional £37.8 million to fund extra debt advice and other money support for people affected by Covid-19 has been allocated by the Money and Pensions Service (MaPS).

  • First funds will help agencies maintain pre-pandemic levels of debt advice.
  • Work has commenced to bring 500 new debt advisers into the sector.
  • The need for debt advice is expected to increase by 60% over the next 18 months.

Up to £7.5 million is being allocated to three debt advice providers – Christians Against Poverty (CAP), PayPlan and StepChange – to cover lost income from a key voluntary funding stream known as ‘Fair Share’. The scheme links directly to how much debt customers repay and has seen a significant reduction since the pandemic took hold.1 MaPS has taken this action to ensure these providers can maintain much of their pre-pandemic capacity for customers who need debt advice.

StepChange is an existing partner of MaPS but this is the first time the organisation has provided funding to CAP and PayPlan.

A separate funding stream has been established to employ hundreds of extra debt advisers ahead of the expected increase in need for debt advice. An initial market engagement exercise by MaPS has indicated the sector can rapidly increase capacity by recruiting 500 additional advisers who will be trained from this autumn.

Organisations interested in bidding to secure new debt advisers using MaPS funding will need to be able to offer a service across all of England via at least two channels.

Caroline Siarkiewicz, Chief Executive at the Money and Pensions Service, said:

“The toll of coronavirus on some people’s financial wellbeing will be severe and long lasting. Although many have been helped by the furlough scheme and special flexibility on products such as mortgages and loans, there are likely to be challenges ahead when these come to an end. We are taking steps now to ensure the support needed by people dealing with money problems will be available at the crucial time, whether that’s right now or in the months to come.

“In the wake of coronavirus, our first priority has been to maintain capacity in existing debt services and it’s great news we’ve been able to agree a funding package to support three major operators to maintain much of their pre-pandemic service levels. We know Fair Share is only one funding source and we stand ready to react to other challenges debt advice providers might face as a direct result of the pandemic. Over the coming months we will also be working to increase the availability of debt advice services by supporting the sector to train up hundreds more debt advisers. Meanwhile, people struggling with their money should be reassured there is support available right now, and the earlier they seek help for their problems, the easier they often are to tackle.”

Minister for Pensions and Financial Inclusion Guy Opperman said:

“This Government has stepped in to support people on low incomes during this pandemic, providing an extra £9.3 billion of welfare support.

“However, there are sadly still people who will be facing debt as a result of this pandemic – we want to ensure that help tackling debt is available to anyone who needs it and this funding will provide vital financial advice to people who need it most.”

Phil Andrew, CEO of StepChange Debt Charity said:

While we know most people want to repay their debt, the sad truth is that in the wake of the pandemic fewer are currently able to. Hopefully this will prove to be a temporary problem for many. As yet, though, huge numbers have little certainty about what their financial future will look like. For us, knowing that we will be able to afford to help as many people as possible, whatever kind of debt solution they need, is hugely reassuring. At a time when we are less able than usual to rely on predictable levels of our normal funding, this support will enable us to help many people through this difficult period. Now would not be the time for reputable debt advice services to have to contract – if anything, we need to demonstrate even more energy and creativity to help solve the nation’s household debt problems created by Covid-19.

Rachel Duffey, CEO at PayPlan said:

Covid-19 has led to a significant reduction in our normal income streams at the very time when both new and existing PayPlan clients need our help more than ever. The funding we have received from MaPS has been instrumental in enabling us to continue meeting the demand we are now seeing from people in urgent need of debt advice. 

Demand for immediate support from people struggling financially is rapidly rising, and there is a sense that the worst is still yet to come. The pandemic hasn’t only put increased pressure on individuals’ finances, but we have seen a significant increase in the number of vulnerable clients accessing our service too. Our dedicated vulnerable client team means we are well equipped to spot the signs of and support people in a holistic approach to debt advice.

Many people we have spoken to during lockdown have completely lost their income and are not used to missing payments. This funding will allow our teams to continue to provide extra support for people who are still very uncertain about their employment status due to furlough and other support schemes that will soon be coming to an end.

The extra £37.8 million funding for England was announced by HM Treasury in June to respond to an expected 60% increase in demand for debt advice over the next 18 months as a result of the coronavirus outbreak (2).

MaPS has committed to ensuring 1 million additional people in England get debt advice over the next 12 to 18 months while enhanced money guidance is due to be available to a further 2 million as an early intervention measure (3). Projects to maximise the capacity of existing debt advice and help as many people as possible are also being taken forwards.

Practical steps during coronavirus

  • Do an emergency budget. It’s important to have a full picture of what you’re spending and what income you’ve got coming in. We have a Budget Planner toolOpens in a new window to take you through this.
  • Talk to your creditors if you might miss payments. Many firms are making allowances or adapting repayment schedules to help people manage their cash flows but it’s important to warn them in advance that you need this help. Learn more detail on managing loans and credit card repaymentsOpens in a new window from our website.
  • Be careful about borrowing. If you have emergency savings, this is the time to use them. If you do need to borrow, try friends and family first. Be wary of high-cost credit and make sure you understand how much you could end up repaying in total. 

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Notes to editors

  1. FairShare is a funding mechanism scheme linked to debt management plans, where a percentage of each repayment a creditor receives is repaid to the advice provider as a voluntary donation. Funding generated through this model directly correlates with the number of consumers going into these debt management plans, the value of the debts they are repaying and how much they are repaying each month. As customers have stopped or reduced debt repayments during the pandemic, the level of funding going to agencies has proportionately reduced, severely challenging their ability to continue offering the same volume of debt advice.
  2. The forecast of Covid-19 impact on debt advice need was modelled in early April 2020, with assumptions based on policy at that time. Debt advice need was modelled using macro-economic variable (unemployment, personal insolvencies) trends based on the period 2007-2011 along with MaPS-held insight into historic debt advice need. Before the crisis, MaPS estimated that just over 5 million people in the UK needed debt advice due to regularly missing payments. Our modelling suggests that, factoring in the impact of Covid-19, this will increase to around 8 million people over the next 18 months, peaking around the end of 2021.
  3. The extra money is in addition to the existing MaPS budget for debt advice in 2020/21 of £64.6 million and will come from a combination of government funds, reallocated MaPS budget and an industry levy. MaPS is also working with the FCA to establish a fairer and more sustainable debt advice funding approach for the future. In addition to the £37.8 million for England, £5.9 million was also allocated to Northern Ireland, Scotland and Wales because debt advice is a devolved matter.

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