£27m promised to save debt service

The Government today pledged £27 million to ensure that consumers struggling with debt could continue to get free face-to-face advice.

The news comes after 500 specialist debt advisers had stopped taking on new cases because the Treasury had decided to close the Financial Inclusion Fund, which paid for the service.

But the new money, which has come from the Department for Business, Innovation and Skills, will enable Citizens Advice and other independent debt advice groups to continue offering a free face-to-face service in England and Wales during 2011/2012.

The Government said it wanted to ensure that people facing financial difficulties could get impartial advice early, rather than having to wait until their problems had become much harder to resolve.

Business Secretary Vince Cable said: "It's vitally important that everyone has access to free debt advice, and I am pleased to announce that my department will provide the £27 million necessary to maintain the programme of face-to-face debt advice.

"While the Government has maintained funding for this programme, it provides only a small part of the revenue necessary to keep Citizens Advice afloat.

"I would like to take this opportunity to call on the other funding streams, such as from local authorities, to help provide whatever support they can to keep this excellent service going."

Financial Secretary to the Treasury Mark Hoban said: "The Government intends to put the provision of debt advice on to a more sustainable footing.

"We want to see a flexible and cost-effective response to debt problems, so that people can be helped in a way that works for them."

The Government has already asked the Consumer Financial Education Body, which will soon be renamed the Money Advice Service, to deliver a free, national advice service.

The group will offer advice face-to-face, over the telephone and online, as well as working to increase levels of financial literacy among consumers and help them to take charge of their finances.

Martin Lewis, creator of MoneySavingExpert.com, said: "The Government has headed off a massive revolt by resurrecting the Financial Inclusion Fund.

"We were already due to launch a campaign next week having been swamped by people expressing their anger. I'm glad the short-sightedness has been addressed."

A record 135,000 people were declared insolvent in 2010, as increasing numbers of consumers struggled to keep up with their debts.

The figure is expected to rise further to 140,000 this year, with levels remaining elevated well into 2012, as the full impact of government spending cuts are felt.