Chamber and committees

Social Justice and Social Security Committee

Debt and low income focus group discussions

Letter to Cabinet Secretary for Social Justice, Housing and Local Government, 16 December 2021

Dear Shona,

I am writing to tell you about the informal focus group discussion that the Committee took part in on 18 November 2021. This was a valuable session and the Committee intends to take forward further work on debt issues as a result of this meeting. In the meantime, I am writing to highlight the powerful testimony shared by participants.

We began by meeting frontline workers and debt advisers who work closely with people experiencing problem debt and poverty. Members then divided into four online breakout groups to hear from people with lived experience. These groups were designed in partnership with Citizens Advice Scotland, Poverty Alliance, Christians Against Poverty, StepChange and One Parent Families Scotland.
A full note from these discussions is included as an annexe to this letter.

The Committee invites you to respond to the evidence heard, and highlights the following key themes which emerged from the session:

Stigma

There can be significant social stigma around debt problems, meaning some people may not seek support or advice immediately. This may make their problem debt worse, as well as increasing the mental health impact of the situation.

Participants talked about feeling ashamed and embarrassed about their financial problems. One participant said that he shut himself off from other people and felt suicidal. Others described the stigma they felt as single parents and the stigma of poverty. One woman told the Committee that her husband works in debt recovery, but she kept her money problems hidden from him because she felt so ashamed.

One group highlighted that people lack empathy for other people’s circumstances.

Digital exclusion

COVID-19 forced a shift in the delivery of debt services, with a move away from face-to-face advice to more telephone and email services. The Committee heard that the pandemic has exacerbated digital exclusion and created an “internet underclass.” It was noted that the shift to digital delivery of services has created significant barriers, both in accessing advice services and in having the skills and confidence to navigate systems such as online banking and energy supply accounts.

The Committee was told that some people only have internet access through their mobile phones. They often have limited data packages, which affect their ability to engage with online services. Advisers also noted that there had not been a high demand for video calls to access advice and support services during the pandemic, because clients would rather use their limited credit to speak to friends and family. It was suggested that free call backs from creditors and caller displays, which clearly indicated that the number was free, may reduce the associated financial anxiety of making these calls.

In some cases, it was highlighted that no alternative to online support was offered, with some councils still not offering telephone or in-person support for Council Tax enquiries. One participant used sight-reader software and struggled to get information from his Local Authority in an appropriate format for his requirements.

Signposting to free debt advice

When people do seek debt advice many turn to internet search engines or social media, where sponsored adverts for paid debt advice direct people to services which are not free or trusted. These websites often use similar names to more well-known, free advice services. This perpetuates the misunderstanding that you need to pay for debt advice.

Some participants said that they thought about getting help but were unsure where to start. Others felt overwhelmed when they tried to access advice. When people did find free advice services they found that many were over-stretched. Signposting of services was a key theme in all sessions.

When asked what would make things better, one participant highlighted that an integrated local and national referral system encompassing employment services, debt advice, addiction services, health and mental health services would be a significant improvement.

Linked to this was the suggestion that referrals could come from housing associations, social workers and health workers, to encourage early intervention rather than waiting for crisis. It was noted that there could be signposting to free debt advice services through the benefits system and Council Tax letters.

Some participants felt there was a need for a well-advertised, reliable source of information, like a Government website, where information is in one place and presented in bite-sized accessible language.

Health

There was also discussion about the strong links between debt problems and poor mental health. For some people this was exacerbated by the pandemic. Advisers described clients who were too overwhelmed to speak to advisers or complete paperwork as part of the debt advice process. It was felt that this would have been more manageable with face-to-face services.

There was also concern about the number of people who had dropped out of the debt advice process during the pandemic. Links between advice services and health services (for example having advisers in GP surgeries) were suggested as one way to address this. The Committee was also told that debt clients should be referred to mental health services where appropriate.

Participants discussed two of the underlying reasons for increased mental health difficulties and disengagement. They noted that the pandemic had been a great leveller as no one could go out and do things. However, as those on higher incomes returned to normal life, those on low incomes were re-experiencing their exclusion. In addition, during the pandemic, many creditors had reduced their contact with debtors. This may be because they were showing forbearance, as required by the Financial Conduct Authority, or because they had to adapt to new ways of working.
However, this lull in activity had now come to an end.

Childcare

Several participants told the Committee that they felt trapped in poverty and debt due to the high cost of childcare. They were earning less going to work and paying for childcare than they were not working and looking after their own children. They felt that this meant they were unable to improve their life circumstances through employment.

Several participants suggested that more financial support for childcare costs would help them with their situation. Some participants suggested that there should be reduced childcare costs for single parents in acknowledgment that they support the costs from one income. This would help them to access work more easily. One participant told the Committee that she could only work because a family member provided free childcare. Her child is 19-months old, so too young to access free childcare otherwise.

Debt solutions

In early 2020, the Economy, Energy and Fair Work Committee conducted a short inquiry on Protected Trust Deeds (a statutory debt solution). During this inquiry witnesses raised concerns that Protected Trust Deeds were being heavily marketed and recommended to people in situations where they were not the best solution.

During the Social Justice and Social Security Committee’s focus group one participant told the Committee that her debt needed to be over £5,000 to be eligible for a Protected Trust Deed so she was advised to add £430 to her debt in order to qualify. She has no income to pay her existing debt.

We would welcome a response to the themes highlighted in this letter and the discussion note attached in the annexe.

In particular, the Committee asks what actions the Scottish Government is taking to address the perceived stigma of problem debt and poverty. The Committee also asks what more could be done to signpost free debt advice services and ensure people facing problem debt have access to the support they need. A key issue is how those who struggle to access online services are being supported.

The Committee notes that in Session 5 the Scottish Government committed to conducting a full review of statutory debt options and would welcome an update on the timescales for publication of the Working Group on Statutory Debt Solutions review of statutory debt solutions.

I look forward to hearing from you and would welcome a response by 13 January 2021.