Fair4All Finance published a request for input on how to prioritise use of new dormant assets funding.
In our response, we highlighted the scale of financial vulnerability in the UK. While welcoming the allocation of an additional £45 million of dormant assets funding, we stressed that, given the 20 million financially vulnerable people in the UK, the funding must deliver significant added value to have meaningful impact.
We expressed scepticism about using dormant assets for “debt jubilee” schemes that directly pay off people’s debts, which risks failing to address the root causes of financial vulnerability, with many advice clients needing to borrow again within months of advice. Without tackling underlying issues, such schemes might primarily end up recapitalising lenders rather than improving long term outcomes for clients.
We noted that while partial debt settlement can work well where suitable, the total scale of problem debt—estimated at around £30 billion across those seeking debt advice—makes direct write off an impractical solution. Instead, we recommend further research into how more client centred, less stigmatising alternatives to insolvency can be developed.
On alternative approaches, we endorse measures that expand access to safe, affordable credit such as a national no interest loan scheme. Many people continue to need credit for emergencies after advice, and unaffordable lending can restart cycles of difficulty. We also called for more research on how financially vulnerable people currently access help for unexpected expenses.
We highlighted building financial resilience through savings as essential. Although some clients manage to save after debt advice, only a small proportion build enough savings to withstand basic household shocks. Dormant assets could support research and evaluation of programmes that help people build rainy day savings, especially among those exposed to recurring financial vulnerability.
We also emphasised the need for improved access to insurance—such as contents insurance and income related protection—to help people cope with financial shocks without falling back into problem debt. We suggest expanding efforts beyond social housing tenants to private renters and exploring the role of debt advice providers in supporting people to access appropriate insurance products.
Finally, we underscored the importance of income maximisation and improved referral pathways. With billions in unclaimed benefits and many clients needing support beyond debt advice alone, strengthening referral systems, enabling easier claims processes, and joining up fragmented support networks could significantly improve outcomes for people with complex needs and help prevent repeat cycles of problem debt.