The Department for Business, Innovation and Skills: Helping over-indebted consumers - Public Accounts Committee Contents

2  Improving the overall approach to tackling over-indebtedness

11. Current outstanding consumer debt is around £1,500 billion, and some 11% of the UK population struggle to manage their debts.[21] The Government's strategy to tackle problems faced by those struggling with unmanageable debt was introduced in 2004. The strategy aims to reduce the number of people who become unable to manage their debts, and to improve support for those who do become over-indebted.[22] The strategy contained 51 different interventions, including both the Department's debt advice project and its work to combat loan sharks. The interventions were to be delivered by different Government departments, local authorities and the devolved administrations.[23] Spending on the strategy's main interventions, including more recent projects totals some £600 million for the period 2004-2011.[24]

12. The Department shares responsibility for co-ordinating the strategy with the Ministry of Justice, and the Department for Work and Pensions. As the 51 different interventions of the 2004 strategy are spread across various departments and cover a wide range of different activities, a co-ordinated approach is necessary to achieve coherence and control the risks to value for money, such as an inability to respond effectively to change.[25]

13. There has been little co-ordination of the strategy, which has been implemented as a collection of separate projects rather than as a coherent whole, despite mechanisms being put in place at the start which were intended to ensure effective co-ordination.[26] Oversight of the strategy was intended to be provided by three working groups composed respectively of Ministers, officials, and wider stakeholders. Of these, the Ministers group did not meet, with the only contact being by correspondence, and the officials group last met in March 2006.[27] Furthermore, no single department took on the responsibility for managing the programme of activity as a whole, and no alternative arrangements were established. There is no one in charge of the strategy and the lack of co-ordination has resulted in confusion as to which activities of Government actually constitute the strategy.[28]

14. Despite the lack of formal co-ordination on this strategy, there have been other attempts to co-ordinate an effective response to financial problems for consumers arising from the recession. The Consumer Finance Forum has been established, and the Department for Communities and Local Government has conducted a number of cross-departmental meetings on support for people struggling to pay mortgages. The officials have also met through the National Economic Council to address issues relating to debt.[29]

15. The Department has specific responsibilities for evaluating the strategy. However, the strategy has never been evaluated as a whole, so it is not possible to know if it is meeting its objectives of minimising the number of people who become over-indebted, and improving support for those who do.[30] The Department has found it difficult to evaluate the strategy because of the number of policy interventions, the influence of external variables and the complexity of the drivers of over-indebtedness. Individual departments had therefore remained responsible for evaluating the success of their own interventions, and there was no information on the relative cost-effectiveness of different interventions. Furthermore, the Department itself did not know the relative cost-effectiveness of those interventions for which it is wholly responsible.[31]

16. Annual Reports were produced in 2005, 2006 and 2007. These provided operational plans for the following year, but did not assess progress against the original Action Plan in the strategy. No report has been produced since 2007 as the Department considered that events were moving so quickly that a Report would be out of date by the time the Department had published it.[32]

17. The Treasury was uncertain as to whether the current interventions are indeed the most appropriate ones to achieve the strategy's aims. The Department had not yet considered the future of its interventions beyond the end of the current funding period to March 2011, but agreed that it needed to focus its interventions more effectively in order to achieve maximum value for money.[33]

21   Q 53; C&AG's Report, para 1 Back

22   C&AG's Report, para 3 Back

23   Qq 3, 4 and 36 Back

24   Q 32; C&AG's Report, para 3 Back

25   Qq 4, 19 and 27; C&AG's Report, para 3 Back

26   Qq 4 and 6; C&AG's Report, para 16 Back

27   Qq 7 and 20-23 Back

28   Qq 4, 53 and 59-60 Back

29   Q 7 Back

30   Q 8; C&AG's Report, para 3 Back

31   Qq 8, 45, 62 and 65; C&AG's Report, para 3.34-3.35 Back

32   Q 9 Back

33   Qq 8, 9, 53 and 59-60 Back

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