Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:
"In the UK, one person in ten is struggling to manage his or her debts. And the total of all consumer debt is enormous, some £1,500 billion.
"To try and help people who are struggling with unmanageable debt, the Government in 2004 launched an over-indebtedness strategy to offer more support to such people and to reduce their number.
"Unfortunately, the management of this strategy has been a complete failure. The Government created a myriad of different interventions, 51 in total, but the arrangements for coordinating them have not worked and no one has been in charge.
"Despite being in place for more than six years, the over-indebtedness strategy has never been evaluated to see whether it is working and since 2007 there has not been a single progress report.
"There has been one noticeable gleam of light. The Department for Business, Innovation and Skills introduced a project to offer face to face advice for people who were struggling with debt.
"This support has been a success: people who used it liked it and it has helped more people than planned for less than budgeted. Unfortunately, even this programme is starting to struggle because it cannot keep up with demand.
"The growing demand for debt advice is outstripping the Department’s capacity to provide it. It must work with those in the public, private and third sectors who provide debt advice, to do all that they can to make good quality guidance available for those who need it."
Mr Leigh was speaking as the Committee published its 31st Report of this Session which, on the basis of evidence from the Department for Business, Innovation and Skills and HM Treasury, examined the experience to date of delivering the debt advice project, and how the overall strategy for support to the over-indebted has been managed.
Consumer debt stands at around £1,500 billion, and some 11 per cent of the UK population struggle to manage their debts. In 2004 the Government launched a strategy aimed at improving the support to, and reducing the number of people who struggle with unmanageable debt.
The Department for Business, Innovation and Skills (the Department) shares responsibility for co-ordinating the strategy with the Department for Work and Pensions and the Ministry of Justice, and is responsible for the strategy’s evaluation.
There has been a complete failure to manage delivery of the strategy. No one is in charge of the strategy, groups intended to oversee it have not met, and there has been no reporting on its progress since 2007. The strategy has not been evaluated to assess whether the policy goals have been achieved and the Department does not know how effective the interventions making it up have been.
Since 2006 the Department has also managed a project to provide face-to-face advice for those struggling with debt. The £130 million project is funded primarily from the Treasury’s Financial Inclusion Fund, and delivered locally by Citizens Advice and other third sector organisations.
The Department has achieved greater success in managing this particular project, which is delivering more debt advice than planned at a lower cost per person than budgeted. Nonetheless, the project is currently unable to meet all the demand from those users it is intended to help.
More people could be reached if the Department better understood consumer needs, the effectiveness of different methods of delivering debt advice, and the most efficient ways of providing advice. In addition, much debt advice is already provided by the private sector and the Department needs to consider both the quality of the advice provided and the contribution that private sector advice could make in the future.