This article, written by Jonathan Carr-West, Chief Executive of LGiU, was originally published by Guardian Local Leaders.
The debt advice charity StepChange saw a 30% increase in the number of people seeking help last year, the government’s Money Advice Service says there are 9 million people who would benefit from help and 15 million people showing at least one of the warning signs of debt problems.
Leaving aside the bigger economic question about whether a recovery based on consumer debt is sustainable, we can see that debt problems are having a terrible effect on the finances, health and wellbeing of millions of people in communities across the country.
We wanted to understand the scale of the problem, vividly outlined by speakers such as Stella Creasy MP and Lib Peck, leader of Lambeth council. But we also wanted to understand what, practically, councils can do to help manage the causes and effects of problem debt.
Over the course of the day we heard examples of initiatives that councils across the country are taking to help people avoid and manage problem debt. From these we can draw five top tips for what local authorities can do:
1. Build the right sort of conversation
We all need it at different times in our lives. The problem derives when credit becomes a routine part of trying to get by and when debt builds up to unaffordable levels. When this happens there’s still a lot of stigma and people are reluctant to be open about it. Yet we know that the biggest factor in how successfully people manage debt is whether they talk to the right people and get appropriate advice. Councils need to make sure that they have plentiful communications about debt problems and where to go to get (free) advice and that these communications make clear that problem debt is not always due to bad decision making. In Lambeth they are also twinning banks with schools to help young people learn about managing their finances and establishing Money Champions who can offer frontline and peer to peer support.
2. Spot the signs and intervene early
Councils tend to have a lot of data about people but they don’t always connect it. There are lots of red flags that can signal possible financial difficulties: job loss, missing a council tax or rent payment, illness. Council staff need to be trained to recognise these signs and act upon them. Some councils such as Plymouth have been running early intervention workshops to help people with early stage debt problems.
3. Refer, refer, refer
While some councils have been offering advice themselves, this isn’t always necessary. There are a number of agencies offering free debt advice, including CAB and StepChange. Good advice is the single most effective aid to managing debt.
Councils need to refer people to it and follow through on the referral.
4. Manage markets
This is more unfamiliar territory for many local authorities but there’s a lot that councils can do to ensure that the local credit market works in the interests of citizens, whether that’s working with the banks to roll out bank accounts to more people, whether it’s exploring alternative credit arrangements such as community banking, supporting and promoting credit unions or where appropriate using planning powers to manage the number of payday lenders in a community.
5. Walk the talk
It’s no good one part of the councils trying to help people manage their debt if another department is pursuing them for council tax or rent arrears. Local authorities need to take a more rounded view of people’s credit issues and adjust their debt collection policies appropriately, Similarly they need to ensure that they are limiting the conditions in which problem debt thrives by paying the living wage and ensuring those they commission do.
This may seem like a long wish list: nice to have but difficult to achieve in straitened times. But, as delegate after delegate at the summit pointed out, the impact of problem debt places a huge burden on the council and thus on the community as a whole.
Helping mitigate these problems is not just good for the people affected, it’s sound public management too.
The LGiU will be producing a short pamphlet which looks at the different practical ways councils can support residents struggling with debt. If you are interested in finding out more or sharing a case study, please contact Lizzie Greenhalgh at email@example.com or by calling 0207 554 2800.
Photograph by Meshal Alawadhi, Flickr.