4.3.8 Guidance and support – Citizens Advice

I'm here with Hugh Stickland who's Chief Economist of Citizens Advice.

Hugh - when did Citizens Advice get underway?

So Citizens Advice started the day after the breakout of the Second World War in response to homelessness, in response to men being called up to service and in response to evacuations from major cities. So Citizens Advice has been around for over seventy-five years now, starting in 1939 and we're still going strong.

So originally then you were funded by the government but how are you funded now?

It was indeed funded by the government and we still receive the majority of our funding from the government as well. That certainly reflects the core advice work that we do. But we also receive funding from the Money Advice Service to help people who are in debt and debt hardship and to also give them money advice. We also receive funding from a range of different organisations from high street banks to energy companies to individual donations as well so it's a real breadth of different funding that we get.

Now we're here today to talk about financial issues and guidance on financial matters but when it comes to financial advice there's an issue isn't there, because you can't provide regulated financial advice about products. You can only provide guidance and help. How does Citizens Advice keep the divide between financial advice and financial help and guidance?

Well first of all we're not gonna be changing our name from Citizens Advice any time soon. We provide advice on a whole range of different issues including money issues but also welfare and benefit issues, housing issues et cetera and people understand the word 'advice'. When it comes specifically to financial advice then you're right. We will not give people what we might call regulated independent financial advice. We won't recommend specific products or services for people to purchase. However, what we do do is provide people with the basics, the basic knowledge of the financial system, the basic knowledge about how to manage their money and we may well help people understand the options available to them so actually explain potentially what an annuity is or what an ISA is but we won't go as far as to say this is the right product for you.

Very much of you I get is that Citizens Advice deals with people who have already got into problems. You're a reactive organisation. But are you doing work to get to people before they get into problems? Are you taking action to be proactive in terms of guidance as opposed to reactive?

We absolutely do both. Traditionally we're very much I guess an emergency organisation. People refer to us as the fourth emergency service if you like. So specifically with finances then absolutely people will come to us when their debts have got to a position where they can't manage them anymore. Now we want to do something different in this space. And indeed many of our stakeholders, including the government, also want us to do something different. So we are proactively doing more in terms of financial capability. So going out into community settings, into children's centres, into GP's surgeries, a range of different venues that you might find us to give people both one on one financial capability training, how to budget, jam jar accounts, what different rates of interest mean et cetera. Also being savvy in terms of their consumer behaviour so ensuring that they're on the right deals, the right energy deal, the right broadband deal for them. So we very much want to see this grow as part of our offering. It shouldn't just be about emergency debt advice. But if we can we will move upstream and we will give people face to face, telephone and digital advice on how better they can manager their money.

So it really sounds like you're taking a proactive approach when it comes to financial education and not just waiting for problems to occur.

Absolutely. That's where we want to be. That's where we're moving to. It will take us time to get you know across every area of England and Wales that we operate in, but we do want to meet people where they are. The other thing to say of course is in generally giving more wide ranging advice potentially on employment situations or work situations or housing situations that often pre-empts what we might call emergency debt advice.

So if we can sort out someone's benefit entitlement, ensure that they're maximising their income, then they're less likely to get into debt months down the road.

When it comes to the UK, is there an issue about financial capability, which is a fundamental cause of the problems which people get into with money?

Well we think this has been an issue for some time and it's not just an issue for those with the lowest incomes at the bottom of society but in fact many, many people struggle with managing their money um and many people could certainly sharpen up their skills in terms of budgeting and also their switching behaviour ensuring that they're on the best deals. Now some of our research has shown that about eleven million adults out in the UK don't regularly save. So should the washing machine break or the car break down they don't have that kind of three hundred, four hundred, five hundred pound buffer that will enable them to fix the problem and move on with their lives. So this is a real issue and it's for organisations such as ourselves to help society to manage their money better.

So really should the government be doing much more than they are?

The government absolutely needs to understand the situation that we're in. People's financial capability is not always strong and that has huge implications for the way that society is run and indeed for the economy as a whole. So the government does need to get behind organisations such as ours to ensure that more and more people out there are in control of their money, can find the right tools to help them manage through the month and can budget successfully.

I have to ask. What are the hot topics when it comes to financial issues and the guidance which you are providing? Which problems are growing and maybe which problems are getting better? Which problems are easing?

We've seen a really, really interesting trend over the last six or seven years ever since the financial crash where consumer credit issues, people coming in with debts around credit cards, unsecured loans, bank overdrafts, they're actually dropping and diminishing. What's taken its place is worrying though. People are falling behind on their rent repayments. People are falling behind with paying their council tax. People are falling behind with their energy and their water bill. The number one debt issue that the Citizens Advice deals with now is council tax arrears, which is a priority debt and can have some serious implications if people don't pay.

We all know that new pension freedoms were rolled out in the UK in 2015. Are you starting to see questions and issues arising from people who've got these new freedoms and really don't know what to do with them?

Well the first thing to say is Citizens Advice does provide a Pension Wise service. So people come to see us face to face for guidance around the pension freedoms that they now have and we see people using Pension Wise in a variety of different ways. Lots and lots of fact finding. What options are available to me? What do these mean? What might it mean in twenty years time and so on? But it's not just isolated to pensions. We find that people come in with a range of other issues as well and want to discuss the interaction of their pension freedoms with the fact that they might need to repay their mortgage. They have outstanding debts. They might want to downsize. They've got something going on at work. They're wondering about when to become, when to retire. So we see lots and lots of advice around those pension - the Pension Wise service and lots and lots of people needing to understand how the pension freedoms interact with everything else going on in their life.

So Hugh, it seems to me that there may be a case that in ten years time people will be coming to you with problems about their pension money. Their pension money has been used up and they haven't got enough money to live on in retirement. Are we not talking about a problem just brewing up for the future here?

Well look the pension freedoms - the government has said to people it's your money. You're best placed to know how to spend it or save it or use it. Now the point of Pension Wise is to help people and guide people to appreciate and understand those problems so hopefully in providing the service we won't see people coming back in five or ten years time saying I've blown it all on a fast car or a holiday and therefore I have nothing to live on. But look, it's a real possibility and the government really do need to think about that as they go ahead and consider options to secondary annuity markets for example.

Moving on from pensions, do you think that generally financial problems are caused by financial products just being too complicated?

I certainly think there is a case to say that many financial products can be very, very complicated. And it's a matter of life now that everything seems to have become more complicated partly you know we shop around for different energy suppliers, we switch bank accounts. All of these things have pages and pages and pages of terms and conditions attached to them but even for very well educated people they don't always appreciate some of the simplicities around financial products. So being able to explain rates of interest, being able to explain APR - these are things that people do struggle with so there needs to be clarity from the financial services sector and we need more consumer education in terms of what some of these options are.

When it comes to financial mismanagement are we really talking about behavioural problems here and behavioural traits causing the problem rather than a fundamental lack of money?

We think there are all sorts going on in this field and of course everyone is an individual. Certainly we'd agree that financial capability, the levels are just too low in the UK at the moment and therefore we need to do more to help people, to help educate people, and to help people put that education into practise. However, the majority of debt cases we deal with now are usually due to unforeseen circumstances. So sickness, illness, people becoming disabled, redundancy and job loss, bereavement, separation from their partner all of these things can have huge knock on impacts onto someone's budgeting, onto someone's financial plans and it's often these things that lead people into financial difficulty and debt.

So it seems to me Hugh that you're talking here about tipping points when it comes to people getting into financial problems, it's not really about behaviour. Something real happens to their financial position and this tips them into a place where they need guidance and help.

I think that the word that you used there tipping point is really important because it's usually a one off event that is the tipping point for someone who suddenly spirals into a debt problem. However, that underlying appreciation and education and behaviour around their finances is still really important so we must do more for all swathes of society to ensure that they do have the financial skills should something happen to their relationship or their house or their health that will help them cope when that incidence happens.

Would it make things better if the government made more financial decisions for people if they decided you know okay there are only gonna be five different types of mortgage products with these rates linked to LIBOR or linked to bank rate, you know make things simpler for people then they won't get into so many problems.

Well I think first of all we have to appreciate and understand that everyone is their own person and we can't expect the government to make everybody's choices for them. I think there is a live debate in some ways to be had around the number of tariffs out there. So for example in a different market there's been a restriction on the number of energy tariffs that energy companies can offer to their customers. Qquite how we take that forward into other markets that's a very interesting question and I'm not sure the government would be entirely convinced that there is a role for them to take a more paternalistic view. But therefore there must be a role for organisations such Citizens Advice to help people understand the choices that are available to them and the consequences of making some of those choices as well.

Hugh, if you had one tip to give people about financial management, about improving their household finances what would it be?

One thing that I did a few years ago was for two weeks I wrote a diary of everything that I spent through cash, on my debit cards, all the bills that came out and out of the account. It was fascinating. I just didn't realise how much money I spent on things like lunch and the odd coffee here and there. Once you can understand where your outgoings are going to, once you can understand how you're spending, it gives you much, much more power to appreciate well actually how should I budget here? Can I save money here? Am I investing enough into this? So it's a really interesting project for people to do.

And Hugh, I have to finish by asking if someone wants to get in touch with Citizens Advice, how do they go about doing it?

Well first of all look out for us. We're in about two thousand locations up and down England and Wales, from high street locations to GP surgeries, to community centres, to libraries. So if you see the sign do drop in, get an appointment. It's worth doing. Secondly, if you're online then do Google Citizens Advice. There you'll find the telephone numbers that are both local to you and also national help lines as well. You can also put in your postcode on that website and it will show you exactly where the bureau locations are and it will rank them by the ones that are closest to you. So please do make use of it. We have some wonderful advisers. Over twenty thousand volunteers, standing ready to give you help, advice, guidance on money, on finances, on benefits, on housing, on a whole world of things. I can't commend it highly enough.

Hugh, thank you very much indeed.

Thank you.