Scottish Government

3 CONCLUSION AND IMPLICATIONS

Introduction

3.1 Although the impact of debt on individuals is fairly well understood, there is an absence of evidence on the impact of debt advice (Williams and Sansom 2007:1, Pleasance et al 2007:1). There remain unanswered questions about the best ways to provide advice to population sub-groups whether identified by age, gender, ethnicity or financial need. Furthermore, the economic consequences of debt escalation and attendant effects on local communities have also been neglected. Although the Pleasance (2007) and Williams and Samsom (2007) studies on the impact of debt advice make important contributions to our understanding of individual experience of debt advice, there are numerous outstanding research questions many of which are highlighted below. Having summarised the main findings, identified methodological flaws, highlighted where the evidence reviewed is inconclusive and outlined a range of future research requirements, this chapter draws attention to a number of key issues which have transpired from this literature review.

Findings

3.2 The majority of literature reviewed reported a clear positive impact of debt advice. Benefits included improvements in; emotional outlook; levels of stress, health and well being; levels of debt and income; knowledge and understanding; and relationships with creditors and family. Further outcomes included; increasing benefit uptake which in turn profits local economies; reducing debt as a factor in criminality and avoiding court action by improving negotiations between debtors and creditors; and decreasing student drop-out.

3.3 Although there is no quantification of relationship breakdown as a result of bad debt, anecdotal accounts do exist. Similarly, the resulting costs of divorce and family breakdown are not readily available. Research indicates that stress, depression and anxiety are the most common consequences of over-indebtedness.

3.4 This review did not uncover any systematic evaluation of the economic and financial consequences of debt in relation to; lost economic output, earnings and tax revenue; increased benefit claims and legal costs; the health service and local authorities; house repossession or local communities.

3.5 The research evidence suggests that:

The nature of debt

• the nature of debt itself is evolving with the cost of utilities, for example, taking over as the main pressure on debt clients' income
• the demographic profile of those in debt has altered with older people, for example, having proportionately more and higher debts than before

The impact of debt advice

• where research has been undertaken, there is clear evidence of the many benefitsassociated with receiving debt advice
• there is a significant tail-off in the benefits of debt advice over time
• there is a paucity of research on the impact of individual money advice approaches

Location

• substantial proportions of those in debt are getting advice from the wrong places and that many disadvantaged and 'hard-to-reach' individuals respond most effectively to outreach advice services

Preventative approaches

• financial capability initiatives have substantial cost benefits for the financial services industry and government while also helping individuals to manage their personal finances and either prevent or deal with debt more effectively

Current evidence gaps and future research requirements

Methodological limitations of existing research

3.6 The literature review identified a number of methodological weaknesses in existing research work.

• research participants tended to be those who had better experiences of debt advice or whose situations were relatively stablerather than those for whom advice had not been successful or whose difficulties were more widespread
• people facing debt sometimes lead unstable lives and consequently it is difficult to conduct follow-up research (i.e. 29% of participants moved home in the 20 weeks between initial and follow-up interviews) (Pleasence et al 2007:ii)
• it has proved difficult to recruit participants onto research projects and consequently much of the research on the benefits of advice has been concerned with small sample sizes - this makes it difficult to make statistically robust generalisations
• although evidence of benefits does exist, such as respondents felt their health had improved, these qualitative statements do not reveal actual reductions in GP visits or the costs of further care if advice had not been sought. It is difficult therefore to place an economic value on advice or fully understand the institutional consequences of decreased demand on wider services
• isolating the effects of advice intervention from other factors has proved problematic, as has producing a control group, not least, because of the ethical implications of withholding advice ³⁹

Gaps in the knowledge base

3.7 Also highlighted were shortfalls in the current knowledge base:

• the absence of systematic quantitative evidence on the economic consequences of debt escalation and/or the overall savings to national and local government budgets as a result of receiving advice should be noted ⁴⁰
• more rigorous and differentiated assessment of the personal, domestic and communal impacts of debt advice is required
• there is a lack of studies in the UK which use validated measures (most evidence is anecdotal) of health and well being to show the direct impact of debt advice on mental health (Plumpton and Bostock 2003) and other aspects of health
• there is a dearth of longitudinal studies which track the long term effects of current provision
• no studies were identified which traced differentiations in impact on different population sub groups
• no research was found which accounted for the effects of different methods on different sub groups over time
• there is no comprehensive map of current debt advice services.
• while the Scottish Government has developed a standard reporting framework for publicly funded agencies, other data gathering is generally not commensurable across agencies which results in fragmented and incompatible data sets (Fearnley 2007: 2) -- correspondingly outputs are not evenly expressed.

3.8 Additionally, for Scotland:

• the cost effectiveness of current service provision has not been measured against the Scottish Government Purpose or National Outcomes

Future research requirements

3.9 It is suggested that the literature review was not able to provide a comprehensive or systematic response to the following research considerations. Resolving these questions would help to provide a solid and convincing evidence platform from which to provide properly informed and accurately directed money advice provision in Scotland.

Additional considerations

3.10 The following sections highlight a number of issues which emerged from the literature reviewed and which seem to be of particular relevance to current money advice giving provision.

Securing the long term impact of advice

3.11 The literature draws attention to the importance of considering the point at which an assessment of benefits is made as tail-off over time has been identified - six months after receiving advice 76% of participants believed it had helped them avoid or curtail legal action, this figure drops to 54% at twelve-month follow-up (Pleasence et al 2007: 16). Additionally, there is evidence to suggest that despite feeling more knowledgeable about financial matters having received advice, very few individuals (3%) indicated they would handle future problems themselves (Williams and Sansom 2007: 3). Attempts to secure long term self-sufficiency may not be possible for the majority of clients who are likely to require sustained and periodic guidance to provide them with the confidence to take action themselves. Specialist support over the life of a debt can, however, help to avoid further debt and enable individuals to pay off existing debts. In some instances sustained support is available, for example through case work with the Debt Arrangement Scheme which offers assistance for up to five years. Pleasence (2007: 21) advocates a later 'check-up' for those facing chronic debt problems. The implication being that this would help to combat demotivation in the face of persistent problems and ensure advice is appropriately adapted.

3.12 Further investigation is needed on the long term decline in the benefits of one-off advice solutions and the possible positive effects of more sustained guidance and support methods.

Measuring outcomes

3.13 Williams (2004: 27) calls for the collection and publication of appropriate outcome measures and states that these should be a requirement of grant funding. Consideration should be given to closely synchronising Scottish Government funded investment in money advice services with the Government Purpose and National Outcomes. Correspondingly, evaluation of the outcomes of current provision should, in part, be made with reference to this framework.

Increasing financial literacy

3.14 In policy terms, Pleasence (2007: 20) highlights the importance of education and financial capability initiatives which aim to enhance knowledge and confidence, so increasing personal capacity to avoid and deal with debt problems. Financial literacy should be considered as a possible key component of any preventative model. As Thoresen (2008: 7) suggests, money guidance can change the way people engage with, and manage, their financial affairs", potentially improving the financial capability of future generations. The long term impact of emerging financial capability and generic financial advice agendas should be monitored (Fearnley 2007: 4).

Joining up services

3.15 Findings provide further support for the development of coordinated advice and support services and networks. Research by the Scottish Poverty Information Unit (2008: 4), for example, suggests that "there is a need for new and better-promoted models for co-working between mental health advisers and money advice specialists that could then be replicated nationally". The Turley and White (2007: 55) research highlights how one interviewee was on the brink of suicide until she sought advice from the Samaritans;

[The Samaritans] gave me the strength to carry on ... I certainly don't think I would be here today talking to you now … it really was that bad … I could clearly and without too much drama say that the house would have been repossessed, very possibly our marriage would have dissolved and the children certainly wouldn't be with me because my illness would have been so bad they would have been with their dad.

3.16 The interviewee clearly required debt advice assistance as well as support from The Samaritans. In such instances a more coherent and integrated system of support would help to reduce client confusion, recognise the multi-faceted nature of indebtedness and provide the breadth of professional support needed to address these problems. Debt problems are frequently entangled with relationship, parenting, employment, health, housing and education issues, all of which should be acknowledged by a flexible, responsive, interlinked support infrastructure.

A debt advice strategy that employs a range of service delivery methods to reach and effectively support those who face debt problems, including multiple delivery channels, outreach services and check-up initiatives, is likely to result in more people tackling debt successfully. If the strategy links with or involves public education and financial capability initiatives, then its effectiveness is likely to be greater still.
Pleasence et al 2007: 21

3.17 Further, an integrated system of services could target advice at preventative support, crisis intervention and financial capability/planning skills simultaneously.

Developing client-centred services

3.18 Much of the research highlights the importance of developing types of support which are responsive to different social and demographic requirements. The rising number of female clients, for instance, tend to be single, on lower incomes than average and often have children ( CCCS Scotland 2007: 8). This demographic is more vulnerable to debt problems than the norm and therefore it is important to ensure services are appropriately designed and targeted to respond to their needs.

3.19 In relation to the range of approaches applied, Thoresen's (2008: 1) review of generic financial advicerecommends that:

… money guidance will be 'multi-channel', available through the web, telephone and face-to-face. I believe it will be important that the face-to-face guidance is available through trusted local sources, as it will most likely appeal to the least financially confident.

3.20 Geographical location is highlighted by the Buck (2007) report which advocates the provision of outreach services in both fixed institutional settings as well as in the form of 'roaming' advice. Careful attention to the specificity and flexibility of advice services is important, as is consideration of their accessibility and location. Perhaps more radically, advice UK research (2008) highlights failings in what it identifies as a 'top down' approach to advice provision which results in services being hampered by Government imposed contractual restrictions and uses up advisers' time on rectifying decisions made by Government agencies which are overturned on appeal. Steve Johnson, Chief Executive at Advice UK, comments that:

We have to move on from the state shaping advice services through targets, contracts and marketisation. A better way to improve advice services is by addressing client need and cutting out waste. We are actively seeking opportunities to pilot this approach.⁴¹

Addressing the ageing of debt

3.21 Research indicates that "we are witnessing an ageing of debt as the credit card generation reaches retirement" ( CCCS Scotland 2007: 12).

The idea of a life-cycle of debt where individuals use credit in their younger years and pay it back as they age would appear to be shifting as those in older age groups faced by spiralling housing costs, increased living costs and lower than expected returns from pensions use credit as a means to maintain a high standard of living.
CCCS Scotland 2007

3.22 This review has not uncovered any research on the ageing of debt and the consequences of this for an ageing population vulnerable to poor levels of savings, a decline in the value of shares and pensions, increased housing and household costs, and the rising cost of fuel and transport. "This is an area which requires additional research in the future" ( CCCS Scotland 2007: 12).

Conclusions

3.23 Whilst there is clear evidence pointing towards the overall benefits of debt advice for individual clients, there is a lack of systematic research on the different effects of specific forms intervention. The relative costs and benefits of different advice giving methods has also not been adequately addressed. Although there is some evidence to suggest that the benefits of debt advice tail off over time, this work could be strengthened and accompanied by suggestions about how to counterbalance this drift in effectiveness. As the demographic profile of debt clients has altered, particularly in relation to older people, our understanding of the impact of debt advice on different population subgroups has not kept pace with this change. Additionally, data on the specifics of debt advice outcomes in Scotland is limited. As a result, there remain unanswered questions about the best ways to provide debt advice to population sub-groups and specifically in relation to their longer term financial health.