Free debt advice saved

14 February 2011

The government has found an additional £27 million to preserve the provision of free debt advice and save the jobs of hundreds of specialist debt advisers.

Last month 500 advisers were sent redundancy notices and told the Financial Inclusion Fund, which pays for the service in England and Wales, would be axed.

Around 100,000 people use the service each year and the decision to axe it led to increased fears for those vulnerable people in financial trouble.

For more read: Five ways to spot dodgy debt advice firms

Last-minute saver

Funding was due to run out in March and in a cost-cutting measure, the government had decided not to renew it. The advisers the fund employs are specially trained to deal with complex cases and are able to represent clients on behalf of their lenders.

Some free advice would have remained from the Citizens Advice Bureau but this already overstretched service is facing its own funding cuts, in some cases up to 45%.

At a time when public sector cuts are making many people redundant the decision to stop this free, impartial debt service sparked anger from debt groups.

Should you pay for debt advice?

Craig Gedey, spokesperson for the Debt Advisory Line, said at the time: "Cutting these grants is a false economy and at such a crucial time for families struggling to make ends meet, demand for debt management is set to continue and many people need help urgently."

There was also concern that the removal of free services would push more vulnerable debtors into the arms of less scrupulous debt advice firms.

In reaction, the department for business says it has found the money to continue the scheme for another year.

Mark Hoban, financial secretary to the Treasury, says: "The government intends to put the provision of debt advice onto a more sustainable footing. We want to see a flexible and cost effective response to debt problems, so that people can be helped in a way that works for them."

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