The Treasury has announced a £37.8m package of extra funding for the debt advice sector, £14m of which will be paid for by FCA-regulated firms via the financial services levy.
Economic secretary John Glen announced the package on Tuesday (June 9), stating that the Money and Pensions Service (MaPS) will oversee allocation of the funds, including to charities, for debt advice and other money guidance services.
Glen announced the funding alongside other Treasury statistics that show 8.7 million jobs have now been furloughed, with firms claiming £17.5bn so far, while the Self-Employed Income Support Scheme has approved 2.5 million claims worth £7.2bn.
The economic secretary said: “The joint funding package will help debt advice providers to continue with, and increase, their vital work.”
Bringing the MaPS budget for debt advice to more than £100m this financial year, the extra funding has been allocated to help providers cope with an influx of clients affected by coronavirus who need debt advice.
The Treasury said it will also help debt advice providers who have seen a fall in income streams, enabling them to continue supporting staff to deliver these services.
Distribution of the funding will come from different sources: £20.6m from government; £14.2m will be raised through a one-off increase to the financial services (debt advice) levy and a further £3m contribution from MaPS.
The Financial Conduct Authority (FCA), which collects the levy for free services provided by MaPS in England, and for free advice provided by financial bodies in Scotland, Wales and Northern Ireland, said it will consult on the details in due course.
Joanna Elson, chief executive of the Money Advice Trust, welcomed the extra funding, but emphasised that it needs to be sustained “well beyond the current year.”
She added: “It is also important that the government, regulators and creditors work together to flatten the curve in debt problems in the months ahead. The withdrawal of temporary relief measures to help households must be slow, cautious and co-ordinated.”
MaPS chief executive Caroline Siarkiewicz said: “We know there will be increased demand for free, expert debt advice services over the coming months and this extra funding will help to ensure more people can access help faster.”
Deborah Ware, chief operating officer of the Financial Wellness Group, an appointed representative of commercial debt management firm Gregory Pennington, said that debt advice is “in the calm before the storm” and that advice providers are braced for a significant increase in demand, fuelled by rising unemployment. She added however the funding should help the sector boost capacity over the months to come.