The Financial Inclusion Fund’s (FIF) free national debt advice service is set to close after the government axed its £25m-a-year funding.

Last month, the financial secretary to the Treasury, Mark Hoban, confirmed that funding for the free face-to-face advice service, which has operated since 2005, will end in March 2011.

Every year the project has helped around 100,000 people manage a total of over £6bn of debt. Its end will mean the redundancy of 500 debt advisers, at a time when the demand for debt advice has been predicted to soar.

Recent research by the Money Advice Trust suggests that increased unemployment, a potential rise in interest rates and inflation will see the national demand for debt advice increase from 1.6 million to over 2 million people per year.

The FIF project manager in London Tobias Stapf said: ‘Last year the FIF debt advice service has been attested by the government’s own National Audit Office as providing "value for money" because it is saving significant amounts of money for the government, the courts, the NHS, housing providers and of course creditors.

‘Time and time again it has been shown that timely and expert intervention in debt problems can prevent debts spiralling out of control and help people get their lives back on track,’ he said.

A Treasury spokeswoman said: ‘The Coalition Agreement pledged that the government would take action to help people to manage their own debts. We want to make sure that individuals facing financial difficulty can get advice early, rather than wait until their problems become much more difficult to resolve.’
 
She said the government had already announced a free and impartial national financial advice service that will include a financial health check to encourage people to think holistically about their finances and a free personalised action plan.