Written evidence from the Money Advice
Trust (AJ 26)
1. INTRODUCTION
1.1 We are aware that the "Proposals
for the Reform of Legal Aid in England and Wales" currently
under consultation include the removal from the scope of the legal
aid scheme a wide range of debt related issues (including insolvency,
loans, credit card debts, overdrafts, utility bills, court fines
and hire purchase debts).
1.2 Information provided to Money Advice Trust,
(MAT) by Advice Services Alliance estimates that these proposals
will take approximately 75,000 debt cases out of scope of legal
aid. National Debtline, (NDL) /MAT (amongst others) are referenced
in the consultation paper as an alternative source of advice for
debt advice issues. The paper indicates that making use of existing
telephone advice resources will minimise the impact of the proposed
reforms with regards to the exclusion of the aforementioned debt
related issues from the scope of Legal Aid. As MAT is referenced
in the consultation paper, we feel it is important to clarify
our position regarding our capacity to deal with additional debt
advice enquiries.
2. NDL CAPACITY
2.1 In 2010 NDL dealt with approximately 150,000
debt advice enquiries and answered between 70-80% of calls presented
based on its current staffing levels. In the short to medium term
NDL does not plan any further expansion in numbers of advisers
and therefore we are concerned about the additional volumes of
additional calls that these reforms may generate to our service.
2.2 We are currently running a number of pilots
to explore how we can increase the number of clients we advise.
In July 2010 NDL introduced a "triage system" to allow
a less experienced advisers to deal with less complex advice calls.
In November 2010 MAT launched an online debt advice tool, "My
Money Steps" to provide an alternative channel of accessing
advice at NDL. As a result of these developments we predict that
in 2011 NDL will be able to provide advice to approximately 200,000
clients[46].
3. ENSURING AN
APPROPRIATE FIT
3.1 MAT has long been interested in ensuring
that clients have access to a wide range of free advice services
accessible through a variety of delivery channels. We also feel
that it is important for clients to be matched with the channel
that best suits their individual needs or the complexity of their
case. We are aware that the Ministry of Justice is currently undertaking
a rapid impact assessment looking both at client channel preference
and the impact of advice and are happy to provide support with
this research if called upon.
3.2 It seems that debt cases that require specialist
legal debt advice are less likely to be suited to telephone advice
given the need to review papers/contracts and/or represent a client
in court. Complex cases of this nature are more likely to require
face-to-face appointments rather than "self help" advice
over the telephone. MAT currently receives a small number of referrals
from Community Legal Advice and, whilst we may be able to expand
the numbers of calls that are referred across, and are happy to
work with MoJ/CLA to do so, the volumes are likely to be small
compared to the total number of people likely to be impacted by
the proposed reforms.
3.3 A Legal Services Research Commission (LSRC)
survey[47]
showed that the incidence of justiciable problems is significantly
higher for people with long standing health or disability problems,
lone parents and single people and those on very low incomes.
It is evident that the demographic profile of people who currently
access debt advice through face-to-face agencies with legal aid
contracts is often different from the profile of many NDL clients.
In many cases, clients who are classed as "vulnerable"
and require a degree of handholding through the advice process
are signposted by NDL to a face-to-face service in their local
area. Typically this would also include clients with literacy,
language or certain mental health problems. We have always taken
the position that telephone advice should complement and not replace
face-to-face advice services.
4. FUTURE DEMAND
4.1 In August 2010, MAT commissioned The University
of Nottingham to undertake research looking at the likely future
demand for debt advice throughout the period 2011-15.
4.2 Econometric forecasting methods were used
to model the impact of developments in the macro economy on demand
for debt advice based on the Office for Budget Responsibility's
(OBR) forecast for the UK economy.
4.3 Headline findings show that the unemployment
rate and the average cost of credit are most closely associated
with future demand for debt advice. The research suggests that
a balanced forecast[48]
would see demand for debt advice rising steadily from current
levels (approximately 1.4 million clients in 2010) through 2011
back to approximately 1.6 million individuals seeking advice from
the free-to-client advice sector in 2013 (this exceeds that seen
at the peak of the financial crisis in late 2009).
4.4 The research also suggests that approximately
five million individuals across the UK find their debts a "heavy
burden" and are "constantly struggling to keep up".
At present only one in six of these people is seeking advice from
any source. This means that the potential "need" for
debt advice is significantly higher than the volumes we are currently
seeing.
4.5 Reflecting on this research, MAT is concerned
that even if the capacity of the free-to-client sector was to
remain constant in the coming years, the sector is likely to struggle
to meet the additional numbers of clients predicted to be in need
of debt advice over the coming years.
5. ISSUES IMPACTING
THE CAPACITY
OF THE
FREE-TO-CLIENT
SECTOR
5.1 The MAT research into future demand for debt
advice does not take into account the additional impact of any
significant changes to the capacity of the existing free-to-client
sector. In addition to the 75,000 debt advice clients who are
predicted to be impacted by changes to Legal Aid, we expect an
additional 70,000 clients per year will not be able to access
face-to-face debt advice if the Financial Inclusion Fund ends
as predicted in March 2011.
January 2011
46 MMS is a new online debt advice initiative so at
this stage it is difficult to predict with certainty of the volumes
of clients that this will be able to serve in 2011. The tool incorporates
an initial filter which asks clients who have what we class as
an "emergency situation" to contact the helpline, (for
example, the tool will not provide advice to clients who are at
risk of court action). For more information visit www.mymysteps.org
. Back
47
Causes of Action: Civil Law and Social Exclusion LSRC 2007
Back
48
A balanced forecast takes a mid point between the OBR forecast
for unemployment 2011-15 and that of a range of independent economic
forecasts. Back
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