Debt management scheme branded 'seriously deficient'

The Public Accounts Committee said management of the Government's over-indebtedness strategy was "seriously deficient", with no one put in charge of it, while groups that were meant to oversee it failed to meet.

It said there had been no reporting on its progress since 2007, while the strategy had also not been evaluated to assess whether its goals were being achieved or how effective it was.

One in 10 people are currently struggling to stay on top of their debts, and consumers collectively owe 1.5 trillion.

The Government launched an over-indebtedness strategy in 2004 to try to offer more support to people who were struggling with their debts and to reduce the number of people who got into difficulties.

Edward Leigh, chairman of the committee, said: "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 co-ordinating 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."

But the committee said there was "one noticeable gleam of light" in the strategy, and this was the Department for Business, Innovation and Skills' project to offer face-to-face debt advice to people.

It said people who had used the service had liked it, while it had also helped more people than planned, and for less than was budgeted.

But it warned that the programme, which is funded through the Treasury's Financial Inclusion Fund and delivered through groups such as Citizens Advice, was starting to struggle as demand for debt advice was outstripping BIS's capacity to provide it.

The Committee also said the money from the Treasury was not allowed to be used to deliver other forms of advice, such as by telephone or the internet.

But it said face-to-face advice cost an average of 265 per person, compared with 51 per person by telephone and even less over the internet.

It said enabling people who could receive advice by telephone or the internet to do so, would enable more people to be helped, and it called on the Treasury to allow greater flexibility in the way the funds were used.

Mr Leigh said: "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."

Malcolm Hurlston, chairman of the Consumer Credit Counselling Service (CCCS) debt charity, said: "CCCS welcomes this frank report. It highlights the need for the Insolvency Service to carry out a comprehensive review of debt and its solutions to ensure they are effectively dealing with the UK's consumer debt problem."

A Department for Business spokesman said: "The National Audit Office reports that the Government has invested 600m to help people

struggling with debt.

"Close to 300,000 people have been supported by the BIS face-to-face debt advice project alone, and the committee have recognised that it is well liked and provides good value for money."