Friday, 21 January 2011

Financial Inclusion Fund cuts confirmed

LAG has learnt that the Financial Inclusion Fund (FIF) will end in March. FIF pays for just under 500 debt advisers based in Citizens Advice Bureaux and other not for profit (NFP) advice centres. LAG believes this will be a devastating blow to many of the centres as they are also facing cuts in legal aid and local government grants.

The FIF was established in 2004 by the last government. A total of £45m was allocated from the fund to pay for face-to-face advice services in the NFP advice sector to help people facing debt problems. Around 100,000 people a year were assisted by the money advisers paid for by the fund. Most of these advisers now face redundancy. News that the fund was to be discontinued was given by Mark Hoban MP, Financial Secretary to the Treasury, in response to a written question in the House of Commons. Advice agencies, though, are still waiting for official confirmation that the scheme will end from the Department for Business, Innovation and Skills which administers the cash.

It is difficult to exaggerate the impact of the abolition of the FIF grants. Many in the NFP sector had feared that the fund would discontinue due to public spending cuts. Prior to the election, Labour was making no promises over whether the FIF would continue, but the coalition government is now also planning to discontinue funding for debt advice under the legal aid scheme, except if people are in immediate danger of losing their homes.

LAG believes that the decision to cut the FIF and the government’s threat to end legal aid funding for debt advice is remarkably short sighted. Early intervention in debt cases ensures people deal with their money problems before they spiral out of control. Often, when mortgage and rent possession proceedings are imminent, it is too late to keep families in their homes. Aside from the damage this causes to people’s lives, the loss of a family home brings an enormous cost to the state. Shelter, the housing charity, recently calculated that each family forced out of their home costs the state £50,000.

Anyone can face money problems caused by the loss of a job or when something else goes wrong in their lives. LAG is calling on the government to establish a commission or review of the services and funding in place to help people with debt and other civil law problems. The FIF decision shows a lack of strategic thinking on civil legal problems by the coalition government. We believe this has to be addressed as a matter of urgency, before more of the services people rely on when they are hit by common legal problems disappear for good.

Andy Murray of Unite, the trade union which represents many of the advisers now due to be made redundant, told LAG: 'It is absolutely staggering at a time when City bankers are receiving massive bonuses after being bailed out by the taxpayer that the government decides to withdraw this key support to members of our society in distress. The claim that "We are all in this together" is increasingly hollow.'
Update today (24th January). LAG has contacted Phil Jew at Advice UK, the national organisation for independent advice centres. Jew is asking for clarification from the government about the future of funding for debt advice, "Mark Hoban's statement caused alarm by seeming to signal an end to the Government funded face to face debt advice scheme. Such a cut would be a huge blow and would not make economic sense. If there's a possibility of an alternative scheme, we need to know - now!"

The Treasury announcement in full
Image: South Manchester Law Centre

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