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At the end of the day the UK is on the brink of inflation hits, an energy bill crisis, a financial fiasco, a gold market riot, pension problems and a mortgage meltdown. There may be more. I can’t guarantee that by the time you read this column, something else hasn’t fallen over. You may be the Prime Minister.

This string of hardships, and the consequences of this week’s removal of the Energy Price Guarantee from next April, will put more financial pressure on households already battling a cost-of-living crisis. Now is the time to overhaul the national system for providing help and advice to those struggling with debt.

But that’s the plan. Money and Pension Services, a peer agency under the Ministry of Work and Pensions, announced the results of a UK debt advice commission earlier this month. It was the latest in a long story rooted in the perception that demand for these services has outstripped supply, but there has been a desire to provide more support online or by phone.

In the process, MaPS was forced to backtrack on plans to cut funding for face-to-face community advice services by about half in February 2022. In September, we announced an extension of funding for these community services for an additional 26 months. These community services have the complex task of advising people who are in multiple debts and struggling to access other support.

And this month, it signed three new national contracts to provide advice remotely via phone and internet. A true triumph of timing, they are scheduled to launch next February.

There are multiple issues here. According to Damon Gibbons, director of the Center for Responsible Credit, the commissioning process itself is already “making everything unsettled.”

There is some skepticism within the industry about claims that the new system will have raised £76m, 80% more than in 2019. What is clear, however, is that funding will dwindle from pandemic levels when the system is given additional funding by the government. It’s currently “off the charts… underwhelming at the moment,” said Amy Taylor, chair of the Greater Manchester Money Advice Group.

Then there is the potential for disruption due to the transition to the new model. In this model, national remote services refer to local providers and vice versa. Given that an estimated half of web chat contacts will eventually be referred to community-based services, this could increase rather than decrease frontline demand.

MaPS CEO Caroline Siarkiewicz said: . . this service will provide a more seamless and comprehensive offer to the hundreds of thousands of people in need of debt advice. ”

Nerves were not soothed by the choice of provider: some of the largest and most famous debt charities, including StepChange, were unable to participate. Gregory Pennington, a commercial debt management firm, won two of his contracts, raising concerns about how MaPS’ work will be managed alongside paid services. Some charities declined to comment, pointing out that MaPS is dormant. Gregory Pennington did not respond to multiple messages.

Part of the banking sector believes that a system that is funded primarily by industry levies could be overwhelmed by debt, primarily energy bills, and the new model simply bears this situation in mind. “It’s a bit like changing a tire in the fast lane,” said one.

It is certainly difficult to be confident that the capacity increase planned to support over 650,000 people by year three will be sufficient. “This feels like being prepared to deal with situations that aren’t relevant right now,” he says. Combined with high inflation, stagnant wages, skyrocketing energy prices and skyrocketing mortgage rates, she says, for many people, simple debt advice and debt consolidation may not work.

Throw in the mix: The sector is already under pressure and the operating model is untested. Really, it’s not hard to understand what’s going wrong.

helen.thomas@ft.com
@Helen Biz

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This is the perfect time to overhaul your debt advice services. -

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