1 Providing support to the over-indebted
1. The Department's face-to-face debt advice project
is delivered exclusively through third sector advice providers
such as Citizens Advice.[2]
The project is providing a very valuable service to consumers
who find that they can no longer manage their debts, and is likely
to remain relevant given the importance of credit to the UK economy.[3]
The majority of consumers (81%) who had received advice reported
that it had improved their financial situation.[4]
2. The Department's face-to-face debt advice project
is projected to cost a total of £130 million for the period
April 2006-March 2011. To the end of September 2009, the project
had delivered help to some 270,000 people at an average cost of
£311 per person. This is around 9,000 more people than planned,
at a cost of £19 per person less than the budgeted cost.
The overall average cost of providing advice since the project
started has been falling as a result of higher costs initially
to establish the project, and increased efficiencies as the project
matures. The current ongoing cost of providing advice is £265
per user.[5]
3. The cost of advice varies across providers from
£201 to £377 per person. Some of the variation is due
to the different locations and parts of the community that advice
providers are serving. However, some of the variation may also
be due to efficiency measures that have been introduced by some
providers. Many advice providers are assessing whether consumers
need specialist debt advice or could be helped by a non-specialist
advisor, or are diverting enquiries elsewhere. The Department
does not examine cost variations in detail and so does not know
what the impact of these measures is, nor how much of the variance
between providers they account for. The Department agreed that
it needs a better understanding of variations in the cost per
user, and to share best practice between providers.[6]
4. There are different ways of providing advice,
each with different average costs per consumer advised, and each
appropriate to users with different needs. The Department's face-to-face
advice costs £265 per additional consumer (after removing
start-up costs), telephone advice £51 and internet advice
is cheaper still.[7] £123.5
million of the funding for the face-to-face project was ring fenced
by Treasury for face-to-face advice only, which is the most expensive
form of provision. This means that it cannot be used for any other
method of delivering advice. At the time that Treasury agreed
funding for the project it considered that face-to-face advice
was the best form of advice for the most vulnerable groups.[8]
5. It is important to understand the cost, appropriateness,
and effectiveness of each delivery channel in order to maximise
cost-effectiveness, yet neither the Department nor Treasury had
carried out any comparative evaluation.[9]
Of those surveyed by the National Audit Office, around a quarter
of those who had received advice as part of the Department's face-to-face
advice project stated that they would have preferred telephone
or internet advice, both of which cost much less to provide. The
Treasury considered that further research needed to be done to
determine the most effective allocation of resources between the
various different ways of providing advice.[10]
6. Funding for the face-to-face project was provided
in response to an identified shortfall in free debt advice in
2004 and was for a stable level of demand.[11]
Since early 2008 demand for debt advice has increased. For example,
the period from July 2008 to July 2009 saw an increase in demand
of 28%.[12]
7. In response to the increased demand, the Department
has provided an extra £10 million of additional funding to
Citizens Advice for general advice, increased its funding to National
Debtline by 50%, and introduced a self-help kit for those less
acute cases.[13] However,
while advice services managed by the Department have delivered
beyond the agreed capacity, on average by 10%, some projects still
have waiting times of five weeks, and many have waiting times
of two to three weeks. Two providers had to close waiting lists
to new consumers.[14]
8. Funding for the Department's debt advice project
beyond March 2011, and hence its ability to meet increasing demand,
will depend on the outcome of the next spending review.[15]
But the Department's project is only one of many different sources
of debt advice for consumers worried about their debt levels.
There are currently 56,000 licensed debt advice providers, and
the Money Advice Trust estimated that two-thirds of Debt Management
Plans are organised through the private sector.[16]
The Department had not assessed the capacity of the various different
sources for providing advice, or the quality of advice provided,
but acknowledged that it would need to do this in future.[17]
9. To provide an effective service it is essential
that the Department understands user needs so that it can target
services. The Department collects data on people who are getting
debt advice through the services it funds, but its data on the
profile of the general population of over-indebted is more limited.[18]
Those aged between 16 and 35 are three times more likely to become
over-indebted than those aged 55 and above, but seem no more likely
than other age groups to get advice as part of the Department's
face-to-face project. 41% of those using the Department's face-to-face
project are aged between 35 and 49, and only 22% are aged between
25 and 34.[19]
10. As well as delivering debt advice, the Department
delivers a £16.5 million programme to tackle illegal lenders,
or 'loan sharks'. So far, the Department has identified 900 loan
sharks of which 150 have been successfully prosecuted. The Department
is not able to say whether this represents good value for money
because it has not yet evaluated the project, but it has plans
to do so.[20]
2 Q 15 Back
3
Qq 27, 52 and 53 Back
4
C&AG's Report, paragraph 2.11 Back
5
C&AG's Report, Figure 7 Back
6
Qq 14 and 43 Back
7
C&AG's Report, para 3.13 Back
8
Q 15; C&AG's Report, para 2.5 Back
9
Qq 15 and 28; C&AG's Report, Recommendation b Back
10
Qq 28-30 Back
11
Q 15; C&AG's Report, para 2.2 Back
12
Q 43 Back
13
Q 43 Back
14
Q 44 Back
15
Qq 16 and 31 Back
16
Qq 16 and 17; C&AG's Report, para 3.7, Figure 4 Back
17
Q 17 Back
18
Q 15; C&AG's Report, para 3.16 Back
19
Qq 44 and 47; NAO Analytical Supplement, Figure 9, www.nao.org.uk/publications/0910/over-indebted_consumers.aspx Back
20
Qq 36, 38, 40 and 42 Back
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