Government wastes £6.6bn failing to help people struggling with debt

The government is wasting £6.6bn a year by failing to step in early to help people struggling with debt, according to charity Citizens Advice (CAB).

In a response to the government’s spending review, the CAB argued that this money could be saved if government focused on tackling consumer problems early, rather than incurring extra costs through "unnecessary bureaucracy and poor service standards in the public sector" once problems were exacerbated.

The debt advice charity identified reform of the benefits system as a key money-saving priority, adding that 81 per cent of respondents to a recent poll of CAB advisers and clients felt that the way the system was administered was too complex.

It also urged government to keep an eye on mortgage arrears and homeowner debt problems, claiming that early intervention to help homeowners would avoid repossession costs for the Treasury estimated to be £16,000 per case.

Steven Jackson of beatmydebt.com agrees that people need early access to information and support. "The number of people suffering with personal debt problems is clearly on the increase and is likely to get even worse as public sector spending cuts start to take affect".

"The promotion of good information and advice about what to do if you find yourself struggling with debt is vital if problems are to be kept under control" Jackson said.

Processes need to be simpler and fairer

Gillian Guy, chief executive of the CAB, said: "If it is serious about fairness and responsibility as well as growth, the government must use the opportunity of this spending review to create simpler, more efficient ways of doing things and as a result make life simpler and fairer for people relying on public services."

The CAB urged the Department of Business, Innovation and Skills (BIS) to change the approach to enforcement, by ensuring that the cost of enforcement against rogue traders who rip off consumers does not exceed the penalty fees extracted by taking action against them.

The charity also called on BIS to tackle head on what it called "poor quality and high cost debt management businesses" that have sprung up due to the recession.

Guy added: "We are urging the chancellor not to abandon those most in need.

"Problems like debt and housing problems can all spiral if left unaddressed, resulting in more costly solutions as well as mental and physical symptoms, long-term deterioration of health and the associated impact on the economy."

In 2009/10 benefit-related enquiries accounted for 30 per cent of all enquiries dealt with by the CAB. The charity added that poor administration of benefits exacerbated health problems which became a "major cost" to the economy in terms of increased treatment costs, productivity losses, reduced tax revenue and higher welfare payments.

Source: beatmydebt.com