Supplementary memorandum from the Permanent
Secretary, Department for Business, Innovation and Skills
I am writing to provide the extra information
I promised during Monday's Public Accounts Committee hearing on
Helping Over-Indebted Consumers.
Richard Bacon MP asked for a breakdown of the
£600 million figure provided by the National Audit Office
in paragraph 1.9 of the report. I have now confirmed with the
NAO that the constituent programme budgets that make up that figure
are as set out in the table in Annex 1.
Both Mr Bacon and Nigel Griffiths MP asked for
more information on the relative performance of the BIS-led projects
set out in Appendix Two. There were 14 projects from the original
51 on which BIS took a lead or shared lead role. Three of these
relate to the governance of the over-indebtedness action plan
(Elements 49, 50 and 51 in the appendix), which we covered in
depth on Monday and on which I have said that Departments accept
the criticism in the NAO report. The largest programme in financial
terms by a significant margin is the Face-to-Face Debt Advice
Project (Element 33). This was the main focus of the NAO's scrutiny
and has been assessed as delivering good value for money.
We discussed in the hearing the work BIS is
leading to tackle illegal money lenders and provide support for
their victims (Elements 28 and 29). The £16.5 million invested
to date in this project makes this the second largest BIS programme
contributing to tackling the problems of over-indebtedness. As
I indicated on Monday, BIS investment in this area has led to
150 convictions since the project's inception in 2004, helped
over 10,000 people and written off over £30 million in illegal
debts. It is also helping with the rehabilitation of the victims
of loans sharks and promoting greater financial inclusion. As
we informed the Committee this programme is currently being evaluated.
The other eight projects are too diverse to
allow for easy comparison of their relative effectiveness. They
include regulatory initiatives such as the Consumer Credit Act
2006 (Element 23) and the Consumer Credit Directive (Element 27).
They also include a range of more focused interventions, such
as developing new debt advice gateway and formal referral agreements
(Element 30). This was a pilot project that subsequent evaluation
suggested should not be rolled out nationwide. Some have been
superseded by more recent activityeg changes to the advertising,
agreements and early settlement regulations (Element 3) which
are now being updated by the Consumer Credit Directive implementation.
I provide an update on how BIS has evaluated
these initiatives or is planning to do so in Annex 2 to this letter.
I regret if there was a misunderstanding on Monday over the range
of programmes the Committee wished to consider in addition to
the Face-to-Face programme. I hope this letter will reassure the
Committee that BIS is carrying out its responsibilities under
the wider strategy and is assiduous in monitoring and evaluating
implementation and results.
19 March 2010
Annex 1
The main funding streams identified by the NAO,
which includes projects introduced since the 2004 report:
£m
|
Lead Dept/Org | April 2004 to
March 2007
| April 2008 to
March 2011 |
Total
|
Illegal Money Lending | BIS
| 6.6 | 9.9 | 16.5
|
National Debtline | BIS/MoJ
| 8 | 13.85 | 21.85
|
Face to Face Debt Advice | BIS
| 45 | 85.3 | 130.3
|
Money Advice Outreach pilots | MoJ
| 6 | 5 | 11
|
Growth Fund | DWP |
42 | 56.75 | 98.75
|
Regional Financial Inclusion Champions
| DWP | | 12
| 12 |
Money Made Clear | FSA
| 12 | 12 | 24
|
Personal Financial Education in school curriculum
| DCFS | | 11.5
| 11.5 |
Mortgage Rescue Scheme | CLG
| | 285 | 285
|
Total | |
| | 610.9 |
The NAO rounded down to arrive at their £600 million figure. The figure for Illegal Money lending is for spending up to end March 2010. A further £5.2 million has now been committed to this project for the year to March 2011.
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Annex 2
BIS was responsible for 14 of the key elements identified
in Appendix 2 in the original 2004 Action Plan. Numbers 28, 29,
33, 49, 50 and 51 were covered in the NAO report. Updates on the
other projects are provided here:
No 3. New statutory instruments on consumer credit advertising,
agreements and early settlement. These were laid in Parliament
in June 2004 to update the regulation in these three areas to
reflect the way credit was being offered in the market at that
time and to deal with any future developments ahead of the fuller
implementation of the Consumer Credit Directive (CCD). They are
now in the process of revision as a result of the CCD. The new
regulations in these areas will be evaluated as part of the wider
assessment of that directive (see No 27).
No 12. OFCOMpromoting best practice in the
telecoms industryAll fixed line telecoms providers
are required to have debt management and disconnection procedures
that are proportionate and not unduly discriminatory. OFCOM monitor
complaint levels on an ongoing basis. They can take enforcement
action if a provider is in breach of the relevant general conditions.
No 18. Consumer Credit (Amendment) BillThis
refers to the Consumer Credit Act (CCA) 2006 which was fully implemented
on 1 October 2008. The Act updated the CCA 1974. It established
a fairer, more transparent and competitive credit market, updating
consumer credit legislation that had been in place since the 1970s.
The Act will be further amended by the introduction of the Consumer
Credit Directive (see No 3). We are committed to carrying out
an evaluation of the Act within three years.
No 24. Addressing the high cost of some creditA
report by Policis for the Department, The Effect of Interest
Rate Controls in Other Countries, was published later in 2004.
This concluded that imposing an interest rate cap would harm the
consumers it was intended to protect, forcing them to use alternative
less appropriate forms of credit including illegal loan sharks.
This view on caps was shared by Citizens Advice, Which? and other
leading consumer groups. OFT is currently reviewing the high cost
credit market and they will publish their findings shortly.
No 27. EU Consumer Credit Directive (CCD)Although
under discussion in 2004, this was only adopted formally by the
EU in May 2008. The CCD replaces a 1986 directive and takes a
maximum harmonisation approach. It harmonises key aspects of consumer
credit legislation in Member States as part of the objective of
creating a common credit market while maintaining high levels
of consumer protection. We are currently nearing the end of the
implementation phase. We will be making the necessary UK regulations
in the next few weeks. It is too early to evaluate the impact
of this wide ranging set of reforms, but we will do so within
three years of its implementation.
No 30. Developing new debt advice gateway and formal
referral agreementsThis was trialled by the free advice
sector in two pilots in Yorkshire and Gloucestershire during 2006.
The pilots aimed to direct enquirers through to the most relevant
advice source for them. The assessment was that it was not cost
effective and so it was not rolled out nationwide. There have
since been efforts to improve triage in the sector and many agencies
have introduced initial "vetting" of clients to make
sure the right clients are assisted by the right mechanisms.
No 35. Widening and deepening the funding base for
debt adviceThis was part allocated to the advice sector,
creditors and DWP, MoJ and BIS. The Money Advice Trust, a charity
set up in 1991 to increase the quality and availability of free,
independent money advice in the UK, led on the practicalities
of getting in extra funding for the sector and has met with success
from many creditors. Over 30 leading creditors contributed in
the last year.
No 41. Encourage better use of the time order provisionsThe
Consumer Credit Act 2006 (see No 18) was implemented in three
phases and the final phase on 1 October 2008 enacted the changes
on time orders. These enable consumers, following receipt of an
arrears notice, to apply for a time order (which is where a court
can give consumers more time to repay a debt if the court considers
it fair to do so). This will be evaluated as part of wider evaluation
of the Consumer Credit Act.
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