1. Money matters: how welfare to work providers can help tackle personal debt problems Damon Gibbons

2. The debt challenge Period preceding the financial crisis one of significant credit expansion including for lower income households Subsequent downturn has left one in five households experiencing financial difficulty (Gathergood, 2012) Expected 45,000 mortgage repossessions in the year Shelter research into both mortgage and landlord repossessions indicates the hardest hit areas are those with the highest rates of unemployment Rising unemployment and prices, low wage growth and policy measures combining to put additional pressure on those with the lowest incomes Cuts in advice provision, particularly face to face services

3. Social Justice: transforming lives ‘Debt can be a significant problem and can act as a driver of other forms of disadvantage in the same way as worklessness or educational failure can.’ ‘Problem debt is more prolific in people experiencing other forms of disadvantage like unemployment, family breakdown, ill-health and disability, and these groups are more likely to perceive debt as a burden’ Problem debt explicitly identified as an issue to be addressed in Government’s interventions with the ‘most disadvantaged adults’

4. People living in poverty are significantly more vulnerable to getting into problem debt because: – Low income makes repayments difficult – Money management skills may be low – They are less likely to have a good credit rating limiting their ability to access affordable credit, leaving them to rely on companies charging ‘exorbitant rates of interest’ or loan sharks.

5. Our own research… 7.3 million working age low income households faced with a choice of using credit or going without essential items (Can consumer credit be affordable for low income households? 2011) Credit repayments have a knock on impact on other areas of the household budget, forcing cut backs on food, fuel, and other necessities with consequences for welfare Long term debt problems and/or going without associated with mental health problems – anxiety/ depression – which may go untreated for some time

6. Impact of debt problems on Jobseeking behaviour (2010) Distract people from jobseeking – Need to contact creditors, waiting to access advice services; additional time to perform basic tasks Constrain jobseeking efforts – Problems affording travel to training; intermittent phone connections; clothing and tools for work Form disincentives to employment – Credit checks performed as part of recruitment process for some types of employment; Debt Relief Orders; fear of increased debt repayments; experience of running up debts during previous employment Create problems sustaining employment – Over-optimisim at the start of employment; under-estimating work related costs

7. Recommendations at the time: Welfare to work providers to screen for debt problems Formal referral arrangements with debt advice providers Money management sessions in welfare to work settings, to help people manage the transition to work and draw up realistic ‘in work’ budgets Formal partnerships with credit unions to ensure access to bank accounts, affordable credit and savings products Work with employers to ensure that in-work support for people with debt problems (e.g. time to sort out debts, financial education, payroll deduction into credit union accounts) are made available.

8. More recent imperatives… Housing Benefit reform – Direct payment of benefit to tenants from October 2013 – Caps on benefits and restrictions on size of property, April 2013 Proposed payment of Universal Credit on a monthly cycle - a major change in financial habits Advice provision at the local level reducing (Legal aid scope changes; local authority cuts; prospect of move away from face to face provision) Financial incentives to achieve sustained job outcomes, and also now for work with Troubled Families where debt has been identified as an issue needing to be addressed

9. Opportunities for work with Credit Unions Credit Union modernisation and expansion (DWP investment of £38 million in next three years) Citysave credit union in Birmingham is developing trusted intermediary status for RSLs in the city to open ‘jam jar’ with evidence that use of the product can lead to finances being stabilised in as little as three months Liberty Credit Union operating in Havering and Barking and Dagenham are developing an accredited paid apprenticeship scheme for local unemployed young people, providing them with training and skills development over six months. Credit unions also developing alternatives to payday loan products and through Co-op Electricals to the rent to own sector

10. Additionally… Introduction of Budgeting and Short Term Advances as part of Universal Credit, alongside localisation of the Crisis Loan and Community Care Grant budgets in 2013 BIG Lottery ‘Improving Financial Confidence’ Programme – helping tenants moving in and out of work strand Experience from the Troubled Families Programme

11. Affecting the bottom line? No current assessment of the impact of assistance with debt problems on job outcomes, but research into the impact of debt advice on rent arrears and evictions by provided by 7 housing associations over 2 years demonstrates that there is a significant commercial benefit to providing advice: – Arrears fell by 37% over 12 months following a referral and that average arrears rose by 8% for those that did not receive any advice – Direct access to debt advice delivers a net financial gain for social landlords equivalent to £239 for every resident compared to those not getting support

12. No health without mental health (2011) ‘ Provision of face to face debt advice can be cost- beneficial within five years. The upfront cost of debt advice is more than offset by savings to the nhs, savings in legal aid, and gains in terms of employment productivity, even before taking into account savings for creditors.’