Debt help centres saved by government funding U-turn

Some 500 advisers across many organisations, mostly from the Citizens Advice Bureau, were set to be made redundant nationwide due to government cuts which could have meant consumers struggled to get vital fee-free help (see the Debt Problems guide).

This was because the government's Financial Inclusion Funding (FIF) to centres was due to end in April, which led to to anger from opposition MPs in Parliament this week.

However, the Department for Business, Innovation and Skills (Bis) will now step into the Treasury's shoes to prop-up the £27 million-a-year fund until at least April 2012.

The announcement today follows crunch talk between Bis and Treasury officials this week.

The rescue does not secure the future of all help centres as many also rely on local government help and other forms of funding.

For instance, five CAB drop-in centres in Birmingham could still close unless talks between CAB officials and local councillors on Monday can save them.

'Free access vital'

Business Secretary Vince Cable says: "It's vitally important everyone has access to free debt advice, and I am pleased to announce that my department will provide the £27 million necessary to maintain the programme of face-to-face debt advice.

"While the Government has maintained funding for this programme, it provides only a small part of the revenue necessary to keep Citizens Advice afloat.

"I would like to take this opportunity to call on the other funding streams, such as from local authorities, to help provide whatever support they can to keep this excellent service going."

Martin Lewis, MoneySavingExpert.com creator, says: "The Government has headed off a massive revolt by resurrecting the FIF.  

"We were already due to launch a campaign next week (see campaign against FIF closure) having been swamped by people expressing their anger. I'm glad the short-sightedness has been addressed. "Never has the country needed to provide decent debt help more. Over 135,089 people were declared insolvent in 2010. Debt crisis and bankruptcy don't tend to hit until after an economic downturn, and that means right now we expect peak demand, and it won't get better for a long time.

"The return of this fund is extremely valuable, though the crisis for debt counsellors isn't over, with the spending cuts meaning many local councils are pulling their funding. We still expect some big agencies such as some of Birmingham's CAB centres to close."

Further reading/Key links

Get help: Debt Problems, Mortgage arrears and Redundancy guides