Funding for free Debt Advice in the UK
The bulk of free debt advice in the UK is currently funded through the Legal Aid budget administered through the Legal Services Commission (LSC). Debt Advice can be provided through the LSC for some individuals. To be eligible for advice a client must be on a ‘pass-porting’ means tested benefit: Income Support, Income based Job Seeker’s Allowance, Income based ESA or guaranteed pension credit or be within specific income brackets and have a particular level of assets.
The Financial Inclusion Fund (FIF) was introduced as a second form of funding in 2005 focused on the most vulnerable in society and provided free advice to anyone who needed it, without restrictions. Announced in the 2004 Pre Budget Report, £45 million was allocated to increasing the provision of free face-to-face debt advice in England and Wales up until April 2008. This was then extended by £85m until April 2011.
Limited funding for free debt advice is also available from Local Authorities, but as local Council’s face cuts to their budgets of 28% over the course of this parliament and they have no statutory duty to ensure the provision of debt advice, these cuts are may make funding for debt advice highly vulnerable.
The threat to free Debt Advice in the UK
Now that advice provision through FIF has ended there is a danger that many people in need will not be able access free debt advice because they are not eligible for help through LSC funding. Some advice agencies can still offer limited provision due to local authority funding but some agencies are already closing and the numbers of people individual advice agencies will be able to see will be massively reduced, meaning that people in desperate need of help may be turned away.
Indications are that the debt advice currently available through LSC is also now under threat. The Government is proposing £350 million in cuts to the £2 billion Legal Aid budget, including the abolition of the LSC which administers Legal Aid. The upper limit for entitlement to full legal aid support will be lowered from £3,000 in assets to £1,000, and many areas (including most debt advice) will be taken out of scope of legal aid. This would take place over the next three years.
While advice agencies will work to generate new income streams, without FIF or the LSC funding – which represent very large amounts of money - there is a real danger that those in need of free independent advice could fall through the gap without statutory funds.
In addition to the benefits free advice gives to vulnerable individuals and families many studies indicate that advice is also cost effective to the public purse. Therefore cutting costs through removing FIF and Legal Aid will cost the public purse more in the long run. Research indicates that every £1.00 invested in independent advice a £2.98 societal cost saving is made. In addition FIF funded Advisers in Bristol assisted 574 clients in repossession proceedings in 2009 – saving the public purse £2,919,938 in eviction costs alone.
Please write to your MP to let them know you support free legal advice for vulnerable people on low incomes and to demand a replacement for the Financial Inclusion Fund. If you have received free advice please mention this in your letter. You can find out who your MP is by visiting http://findyourmp.parliament.uk/ and entering your postcode. Please feel free to use our template letters as a guide.