Debt Arrangement Scheme - returning funds to the free advice sector: consultation

4. Options

The 'how to' element of redistributing funds back to the sector was touched on during the Group discussions which preceded the Building a Better DAS consultation. Since then, AiB have held further discussions with various stakeholders on SG's behalf, and these discussions have formed the basis of the following options on how the distribution could work in practice.

In looking at options, we have attempted to balance competing priorities, and are aware that:

• If funds are allocated on the basis of cases generated by an organisation, this will have a negative impact on organisations which provide advice, including DAS advice, but whose client base is less likely to have disposable income. Those organisations are incurring costs in giving advice, but are not receiving extra funding because their client base is not suitable for DAS.
• Conversely, if funds are not allocated in this way, this will have a negative impact on those who have generated most of the cases, and therefore funds, but are getting back less than they put in.

The key benefits and risks for each option are shown below. These are not exhaustive lists, and some options will have the same, or similar, benefits and risks.

i. Funds held by AiB and allocated to free sector organisation who nominate AiB as PD

In this option, the funds would be held by AiB and would be allocated to all those money advice organisations in the free sector who have nominated AiB as PD. Funds would be allocated on a pro rata basis dependent on the number of DAS cases that organisation is responsible for.

Benefits:

• This most clearly links the funding going back to the organisations to the costs they incur in running DAS.
• The methodology is entirely objective and it will be simple to administer.

Risks:

• This may be seen as creating incentive to put clients into DAS when another solution might be better for them.
• Organisations with a handful of cases may not want to receive small sums.

ii. 'Trust fund' held by AiB

In this option, AiB would essentially ring-fence the funds available from the statutory fees after its costs have been recovered. These funds would be held by AiB in a 'trust fund' and would be available to money advice organisations in the free sector. This mirrors the way that some umbrella organisations already work.

To disburse the funds, organisations would present a business case to AiB for funds to be released. AiB would then take a decision on releasing the funds. The business cases presented would require organisations to demonstrate to AiB how they will use the funds to promote/increase their delivery of DAS.

Benefits:

• The DAS Administrator/AiB retains control over the entire process.
• As a result of the existing links between AiB and stakeholders in DAS, and the shared understanding of the Scheme, the application process could be streamlined meaning stakeholders are more likely to apply.

Risks:

• It may be administratively burdensome for organisations to complete business cases.
• It will require some limited AiB resources to manage and monitor.

iii. Funds held by AiB - decisions made by Independent Panel

In this option, the funds would be held by AiB but an independent panel would be appointed by the Scottish Government to assess bids for funding, and decide how the monies should be allocated. The panel could be drawn from the free advice sector, and would be able to use their knowledge and expertise to identify the areas which would benefit most from the additional funding.

Benefits:

• Decisions will be made by experts in the field, through an independent decision making process, leading to best use of the available funds.

• As with Option 2, the application process could be streamlined due to the existing links between AiB and stakeholders in DAS, and the shared understanding of the Scheme.

Risks:

• The bidding process might be administratively heavy for the organisations applying for funding.
• Funding is likely to be small scale and time-limited, which may generate challenges if funding is allocated one year but not the next and the organisation cannot sustain the work previously supported by this funding.

iv. Funds held centrally by Scottish Government for DAS use only

In this option, AiB would remit all available funds to the Scottish Government (SG) on an annual basis. The funds would be ring-fenced to ensure they are allocated only to free sector advice organisations delivering DAS. This is broadly comparable to the current approach taken by Scottish Legal Aid Board (SLAB) in their funding of in-court debt advice - and on possibility would be for SLAB to manage the funding on SG's behalf.

SLAB have been managing grant funding programmes for approximately 10 years, underpinned by legislation (Section 4 of the Legal Aid (Scotland) Act 1986).

The funds held by SLAB are allocated to a number of areas, including Debt Advice. This includes funding of some DAS posts in the third sector and in other organisations.

SLAB manages the distribution of funding in the following way:

• Bring together and co-ordinate funding from a range of Scottish Government Directorates taking note of the objectives which the funders want to achieve.
• Receive and adjudicate on applications.
• Distribute the funds in line with their intended use.
• Report the outcomes to the Scottish Government.

Benefits:

• Having a body independent of DAS distributing the funding may increase the perception of fairness, whilst the fact that SLAB are a non-departmental public body responsible to Scottish Government will provide comfort in terms of the security of funding.
• This approach will still provide assurance that funds generated by DAS advice are going back to organisations which are actively involved in giving DAS advice.
• Using an existing mechanism removes the need to create a new one, and the process will already be understood by those likely to apply

Risks:

• The lack of certainty over the likely level of funding may be harder for an organisation such as SLAB to manage.
• Dependence on an existing outside organisation is vulnerable to that organisation's future decisions on resources and priorities.

v. Funds passed to Scottish Government for general money advice support

In this option, AiB would remit the available funds to the Scottish Government to be used for general money advice support. The funds would be disbursed using the mechanisms set down by SG.

Benefits:

• This follows the general direction of travel to bring together disparate funding schemes to prevent third sector organisations facing multiple bidding and reporting processes.
• It will ensure that there is no additional burden on either AiB or the advice sector.

Risks:

• The ethos of the proposed legislative change is to improve the level of DAS take-up by helping the advice sector fund the provision of advice. If the funds are not ring-fenced, they may not be used to support DAS.
• If the funds generated through DAS are not going back to source this may be perceived as unfair to those advisers delivering DAS and the creditors who are de facto paying the fees generating these funds.