The Money and Pension Service have questions to answer about Stepchange

Less than a year after the Money and Pension Service announced they were giving Stepchange, the Debt Advice Charity, a share of £7.5 million, to help increase their capacity to provide debt advice, they have announced they may slash up to 10% of their debt advisers across the UK, with demand for their services expected to rise. 

In June 2020, the Money and Pension Service (MAPS) split £7.5 million of funding between Christian Against Poverty, Stepchange and the private debt management Firm, PayPlan (which is a trading name for Totemic Ltd).

As explained in my previous blog (Stepchange Redundancies: Is it about Covid and a Flawed Funding Model?) Stepchange CEO, Phil Andrew, in a blog (Exceptional Times, Exceptional Measures, and the Future), explained the charity is consulting on redundancies.

In his blog, Phil Andrew, justified the decision by claiming the Stepchange funding model (known as Fair Share) was flawed and as personal levels of debt and the amount people pay to it drops, the Charity’s income drops.

However, as I was able to show in my blog, Stepchange’s income has been increasing year on year for the last five year, and at the end of 2019, just before Covid began, the Charity had almost £21 million in general reserves. In fact, their Fair Share Funding has allowed them to grow into one of the UK’s more wealthiest debt charities, with income of over £54 million in 2019.

Is Fair Share Flawed?

And if additional proof of the sustainability of the Fair Share funding model is required, we only need to look at the other recipient of MAPS public funding, Payplan, who in their 2019 accounts, reported a profit of just over £2 million and held over £8 million in their private shareholder fund. 

Quite clearly the Fair Share Model of both Stepchange and Payplan has served both well.

Why the Money and Pension Service chose to approve public funding of a private debt management firm, with over £8 million in private shareholders fund, whilst public and third sector agencies had their funding cut, needs to be answered.

However, since that blog, Stepchange advisers have been contacting me to express their surprise that they may be about to lose their jobs, as the charity, only last year, went on a massive recruitment drive to cope with the anticipated rise in demand for their services. 

This recruitment drive, it appears, was largely funded by the additional £7.5 million of funding that was made available to Stepchange, Payplan and Christians Against Poverty last year (Additional £38 million for debt advice funding in England goes into action).

The purpose of this funding according to the Money and Pension Service was to recruit another 500 advisers across England, with CEO of the Money and Pension Service, Caroline Siarkiewicz stating only last August:

“In the wake of coronavirus, our first priority has been to maintain capacity in existing debt services and it’s great news we’ve been able to agree a funding package to support three major operators to maintain much of their pre-pandemic service levels. We know Fair Share is only one funding source and we stand ready to react to other challenges debt advice providers might face as a direct result of the pandemic. Over the coming months we will also be working to increase the availability of debt advice services by supporting the sector to train up hundreds more debt advisers”.

What about MAPS Statutory Duty?

However, less than 12 months after that huge recruitment drive it now appears Stepchange is slashing that capacity, which begs the question, what has happened to their share of the extra £7.5 million that they were provided with and what has the Money and Pension Service got to say about Phil Andrews announcement?

Under section 3 of the Financial Guidance and Claims Act 2018, the Money and Pension Service has a statutory duty to provide members of the public in England with free and impartial information and advice on debt. If less than a year after you provide significant levels funding to one of the UK’s leading debt charities, they announce they are slashing that  additional capacity, you have questions to answer.

Clearly the problem here is not Fair Share as a funding model, but the rapid increase in the number of staff recruited by Stepchange, with the added costs to their wage bill (which was £41 million in 2019). One would think that since MAPS last year expected demand for debt advice to increase 50% over three years, peaking in 18 months, why would your plans to increase capacity only be for 12 months? Surely the wheels should not be coming off the plan after only one year?

Of course, the timing of Stepchange’s announcement may be fortunate because we are approaching the 9th June, when last year Stepchange’s CEO, Phil Andrews, welcomed the announcement by MAPS of an additional £38 million for debt advice to help with Covid 19.

It may be that MAPS is about to make another big announcement and Stepchange may again be the fortunate recipient of additional funding. But if this is the case, do we need to go through the pantomime of putting hundreds of debt advisers through the fear of losing their jobs? Surely its not unreasonable to ask that when Stepchange and MAPS agree a strategy to massively increase capacity for debt advice, that they draw up plans that may span a period longer than 12 months?

And if demand has not peaked as quickly as anticipated, with the second, sort of unexpected lockdown, surely you would then just furlough as many staff as you can to preserve your fighting fund for later in the year, when demand is rising again? 

The Money and Pension Service need to step into the space that the Stepchange announcement has opened up. They need to explain what their strategy was, how much did Stepchange receive, how long was it for and how many additional advisers was it expected to employ.

They also need to explain the logic behind giving reserve rich, debt charities and private firms (who reported £2 million in profits in 2019) more money, whilst front line Citizen Advice Bureaux and Independent Advice agencies struggle to keep their doors open.

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