Cuts will affect nearly 500 debt advisors who are already at risk from impending cuts to legal aid and local government grants
Around 100,000 people a year were assisted by the money advisors paid for by the Financial Inclusion Fund Photograph: /Alamy
Legal Action Group (LAG) has learned that the Financial Inclusion Fund (FIF) will be end in March. FIF pays for just under 500 debt advisors 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 problems with debts. Around 100,000 people a year were assisted by the money advisors paid for by the fund. Most of these advisors now face being made redundant. 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 of Business, Innovation and Skills which administers the cash.
It is difficult to exaggerate the impact of the ending 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 FIF would continue, but the coalition government is now also planning to discontinue funding for debt advice under the legal aid scheme, apart from 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 homes cost 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.