HC 271 Money Advice Service

Written evidence submitted by the National Housing Federation

Executive Summary

We believe that there needs to be free, appropriate and easily accessible money advice available to people on low incomes. Demand for money and debt advice services is likely to increase as welfare reforms impact on how much money people have and how they have to manage it. It is important that central funding is maintained for such advice services as it cannot be assumed that other organisations, such as, citizen s advice bureaus , charities and housing associations will be able to expand their current provision to meet the increased demand without any additional external resources. Whilst we support drives to increase digital inclusion, it must also be remembered that online advice is not suitable for all and support for face-to-face and telephone advice must be maintained.

1.0

1.0 Introduction

1.1 The National Housing Federation represents housing associations and is the voice of affordable housing in England. Our members provide two and a half million homes for more than five million people. And each year they invest in a diverse range of neighbourhood projects that help create strong, vibrant communities. The Federation welcomes the opportunity to respond to the Treasury Committee’s call for evidence on the future of the Money Advice Service.

2.0 Who is worst affected by a lack of knowledge of financial matters?

2.1 Those on the lowest incomes can be the worst affected by a lack of knowledge of financial matters as they have the fewest resources to cope if things go wrong. Housing associations house some of the poorest and most vulnerable people in society, many of whom are financially excluded. Despite strides forward in the provision of basic bank accounts over the last few years the Family Resources Survey showed [1] that more than 15% of local authority tenants and 13% of housing association tenants still do not have a bank account.

2.2 Soon to be published research by Policis, funded by the National Housing Federation, has found that only 35% of social tenants feel that they are able to manage their outgoings and commitments comfortably. The majority of social tenants (68%) use some form of credit and 37% use high cost credit such as payday loans and home credit. An even greater majority of social tenants (78%) have no savings meaning that they lack a ‘safety net’ or ability to flex their budget if needed. [2]

2.3 We believe that there needs to be free, appropriate and easily accessible money advice available to this group of people, which is tailored to their needs. Appropriate budgeting support can be vital to help prevent people falling into debt and debt advice can be critical in helping people deal with debts when they occur. The overwhelming majority of those who seek debt advice are on a low income, with a high proportion being social tenants - 22% of social tenants have at some point sought debt advice . [3]

3.0 Impacts of welfare reform

3.1 The importance of such advice will increase as welfare reforms drastically change the way many people have to manage their budgets, as well as leave some social tenants with reduced incomes. The move to Universal Credit means that many people will have to move from budgeting weekly or fortnightly to budgeting monthly. Most working-age social tenants will also lose the option of having housing benefit paid direct to their landlord. In addition to changing the way people will have to budget, welfare reforms, such as the benefit cap and social sector size criteria mean that many will have reduced incomes. Social sector tenants who are deemed to be under-occupying their homes will lose an average of £13 per week. [1] People affected by the benefit cap will lose an average of £83 per week. [2]

3.2 Forthcoming r esearch from Policis has shown that more than half of social tenants feel that a shift to monthly payment of benefit will make it more difficult to manage their budgets. Existing patterns of money management and weekly budgeting have evolved to manage the challenges of living on a very low income. In the last twelve months, 23% of social tenants have struggled to afford food, 24% fuel and 31% shoes and clothing. When money is short, it is easier to save on essentials, such as food, for a day at the end of a week, rather than for several days at the end of a month. [3] The same research also showed that the overwhelming majority of social tenants in receipt of housing benefit believe that it is better to have it paid direct to their landlord.

3.3 Over the four years from October 2013 to 2017 7.6 million households will be transferred to Universal Credit. There is a clear need for advice targeted at the specific needs of people transferring to the new system. Advice needs to be sensitive to the unique pressures faced by this group, for example, tenants may-be reluctant to manage rent payments via direct debits because they have had bad experiences, such as penalty charges, of bank accounts with such facilities. Also, a significant number of social tenants do no t have a bank account. Of those who have moved into banking in the last five years, a little over a quarter experienced a net loss, with any savings from direct debits outweighed by penalty charges for missed direct debits and over-limit fees. [4]

4.0 How should advice be provided?

4.1 The welfare changes, outlined above, are likely to create an increased demand for money and debt advice. We welcome the Money Advice Service’s plans to reach more people but note that this expansion is planned through their online services.

4.2 Funding for and provision of face-to-face and telephone advice must be maintained. Online advice is inaccessible for many vulnerable people who lack either internet access or the skills to access such advice. In the first quarter of 2012 there were 8.12 million adults who had never been online, [1] including 2.61 million adults under 65. A far greater number will lack regular access , or more than basic online skills.

4.3 Given the very great pressures on social housing tenants to manage their limited budget in a new way, we believe that the Money Advice Service should have particular regard to targeting its services at people living in social housing. This could be done through working with social landlords and tenants to look at the most effective means to support people to budget and avoid and manage debt, including rent arrears. Social landlords have a role to play in promoting services to tenants but it is vital that tenants are both able to access the services and make effective use of any advice. The advice needs to reflect the circumstances of social housing tenants and the changes coming in under universal credit. It also needs to reflect people’s preferences on how advice is delivered and people’s very different starting points in terms of numeracy and literacy skills.

5.0 Funding of the Money Advice Service

5.1 We support the current funding model of the Money Advice Service and believe it is imperative that central secure and long term f unding is maintained for independent money and debt advice. Welfare reforms are likely to bring about a surge in demand for such services and it cannot be assumed that other organisations, such as, citizen’s advice bureaus , charities and housing associations will be able to expand their current provision to meet the increased demand and plug the gaps without any additional external resources.

June 2012


[1] Family Resources Survey 2008/9. Figures exclude post office accounts, which do not accept payment by direct debit.

[2] Policis, The impact of welfare reform on social tenants and their finances (forthcoming)

[3] Policis, The impact of welfare reform on social tenants and their finances (forthcoming)

[1] DWP, Under-occupation of social housing Impact Assessment (Feb, 2011)

[2] DWP, Impact assessment for the Household Benefit Cap (Jan, 2012) http://www.dwp.gov.uk/docs/household-benefit-cap-wr2011-ia.pdf

[3] Policis, The impact of welfare reform on social tenants and their finances (forthcoming)

[4] Policis, The impact of welfare reform on social tenants and their finances (forthcoming)

[1] ONS, Internet Access Quarterly Update, 2012 Q1

Prepared 15th June 2012